COVID-19 has swept the nation, and the resulting economic slowdown has
left many people hurting. An unprecedented 3.3 million people have filed for unemployment benefits, and it’s not over yet.
In response, many local governments, as well as the federal government, have called to allow borrowers to request mortgage forbearance to get temporary relief. What is a forbearance? Is it right for you? Read on.
Mortgage Forbearance Agreement
In a mortgage forbearance agreement, the lender agrees not to foreclose on a mortgage, and the borrower agrees to a plan that will result in a temporary adjustment to provide relief, and to pay the balance to be current with the original payment plan. This usually means a balloon payment is due at the end of the forbearance term.
For example, let’s say that:
- your mortgage payment is $1,000/month.
- you use a 90-day forbearance agreement and make no mortgage payments for 3 months.
($1000 x 3 months = $3000 deferred)
- On the 4th month, your mortgage payment will now be $1000 as normal, PLUS $1000 for each month of forbearance ($1000 x 3 months = $3000), amounting to a total of $4,000!
What You Should Do
Uncertain times due to the COVID-19 pandemic have put a strain on many people, and unfortunately, we don’t know when the dust will settle. In general, we encourage everyone to do everything in their power to make regular payments, to avoid the balloon payments that come with forbearance. The last thing you want to do is put yourself at greater risk. If you have any questions, or if you want to discuss the best options for you, please reach out to your mortgage servicer, visit the Coronavirus Servicing page, and this CARES Act and Loan Assistance page or for more information. At Benchmark, we are on your side and ready to help. Download this printable PDF
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