May 12, 2020
Homeownership can be one of the most stressful situations to be in during financial hardship. If you have a mortgage and have recently had financial troubles, there are some important aspects to recognize regarding what actions you should be taking and what you are entitled to.
The first thing to know is that you have the right to contact your loan servicer to ask about your options. If you are worried about missing a payment or have already missed a payment, you will usually be transferred to a “loss mitigation” department. Once you have applied for relief, you are typically assigned a “point of contact” to discuss your relief application.
The relief offered can vary depending on loan type and personal circumstances. The lender will usually qualify you for a modification, a repayment plan, or a forbearance plan. If the lender reviews your application and does not see proof that you will be able to keep the property, they will offer short sale or deed-in-lieu.
Today, most loan servicers are offering forbearance plans as they see a surge of mortgage relief applications. Forbearance plans allow you to miss payments (or partial payments) for a given time. These payments are not forgiven, and you are expected to pay all missed fees at the end of the forbearance period. Other options can sometimes include turning the missed payment amount into a deferred principal balance or modifying the missed payments into a loan. A modification involves restructuring your loan by moving arrears to the back end of your principal balance. Then the term or interest rate is adjusted to make sure the monthly payment will be affordable.
How the servicer handles your relief application is very dependent on who the investor is on your loan. A loan can be federally backed by a government-sponsored enterprise (GSE), which would either be Fannie Mae or Freddie Mac. Other loans that are considered federally funded include FHA, VA, and USDA loans. You do not have to pay back forbearance all at once if you have one of these loans. You can choose to pay the owed amount back all at once, have it added to the back end of your principle, or go on a repayment plan.
How the servicer handles your relief application is very dependent on who the investor is on your loan. A loan can be federally backed by a government-sponsored enterprise (GSE), which would either be Fannie Mae or Freddie Mac. Other loans considered federally funded include FHA, VA, and USDA loans. You do not have to pay back forbearance all at once if you have one of these. You can choose to pay the owed amount back all at once, have it added to the back end of your principle, or go on a repayment plan.
Talk to your loan servicer. Whether or not you know who your investor is, or what you should probably qualify for, you need to be talking with your servicer. You still need to be sending in application material to be considered for relief options, and you need to be checking in with the servicer to ask questions about what the options are and how they will work. Staying active is essential, which is why following these suggestions can make a huge difference.
- Make sure you send in all documents the servicer requests. Check-in frequently to see if you need to update anything.
- Check your mortgage statement frequently. If you see errors, or something does not make sense to you, call the servicer to report it.
- Keep a log of talking to your servicer. Ask who you are talking to and if they have an employee ID. Take notes on what you discussed, including time and date.
- Request documentation for any plan, application, or agreement as you move forward.
- Ask your servicer who the investor is. You can also check online at https://ww3.freddiemac.com/loanlookup/ to see if your loan is with Freddie Mac, or at https://www.knowyouroptions.com/loanlookup to see if your loan is with Fannie Mae.
- If you need help from a specialist, you can always get help from a HUD-certified housing counselor. Just go to https://apps.hud.gov/offices/hsg/sfh/hcc/hcs.cfm. (GLCU Housing Counseling is proud to be on this list!)
During this time, it is crucial to stay informed and take action. Know your rights and responsibilities as a homeowner. Handling a mortgage can be daunting during hardship, but dealing with emergencies requires knowing the right information and proper planning.