Mortgage forbearance is a term we've been hearing a lot lately due to the pandemic. Many homeowners in Berk's County have benefited from this provision. If mortgage forbearance is something you're considering, here are a few things you should know.

What is mortgage forbearance?

Mortgage forbearance allows Berks County homeowners to pause their mortgage payments in order to address a short-term crisis. Generally, lenders do not require any proof of hardship other than a verbal or written request from the borrower.

It's extremely important that you talk to your lender before you stop making payments about going into forbearance. Even if you qualify for forbearance, that protection won't automatically be granted. You have to apply for it first, and stopping payments before forbearance has been granted may make you delinquent on your mortgage and negatively affect your credit score.

What does forbearance mean under the CARES Act?

The CARES Act was the federal government's response to the financial blow caused by the coronavirus pandemic. The 3.2 trillion dollar aid included help for those with government-backed mortgages, which made up three-quarters of all mortgages in the U.S. That includes home loans owned by Fannie Mae and Freddie Mac as well as VA, USDA and FHA mortgages.

Under the CARES Act, borrowers facing economic hardship due to COVID-19 may get mortgage forbearance for up to one year. During that time, lenders cannot foreclose on their properties. Once the forbearance ends, lenders offer several repayment options to homeowners. 

Under the CARES Act, there isn’t currently a deadline that must be followed for requesting forbearance. Once you make the request, you can receive forbearance for up to 180 days or one and a half years if you request to extend it.

What happens if you’re not protected under the CARES Act?

Though borrowers with privately-owned mortgages are not covered under the CARES Act, many lenders are extending forbearance and modification options to these borrowers.

“The congressional mandate and CARES Act only covers loans owned by the government, loans that don’t meet those qualifiers aren’t guaranteed a forbearance. However, the forbearance take-up rates for non-federally backed loans is pretty meaningful,” DeMarco says.

The worst thing you can do to prevent bad credit is to simply stop paying the bill. Regardless of who owns your loan, it's important to talk to your lender if you're having trouble paying your mortgage.

Can you refinance your mortgage during forbearance?

Yes. In May, the Federal Housing Finance Agency clarified that mortgages in forbearance are eligible for refinance.

Can you sell your home during forbearance?

Yes, homeowners in forbearance can sell their homes. The foreborn amount would become payable upon sale of your property.

Does mortgage forbearance hurt your credit?

Your lender will report you as current on your mortgage even though you’re no longer making payments, since mortgage forbearance does not appear on your credit report as a negative activity. But again: make sure you are in touch with your lender about going into forbearance. Do not stop making payments until you have received authorization from the lender to do so. If you stop making payments before you’ve been approved for forbearance, you will seriously harm your credit.

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