January 27

Six Things You Should Know About Mortgage Forbearance in 2022


At the start of the global pandemic, it was estimated that around 40 million Americans could lose their homes. National schemes such as forbearance were created to help those struggling with payments. With many of these now ending, do you know your options? Should you be worried about catching up on payments there are several methods available. Read on as we discuss mortgage forbearance and six facts you need to know.

What Is Mortgage Forbearance?

Mortgage forbearance describes a period in which the borrower’s payments halt or reduce. This happens when financial difficulties prevent the borrower from paying the monthly amounts agreed with the lender.

The global pandemic meant that many homeowners entered forbearance. In many cases, one or more members of the household may have experienced a job loss or a dip in income. Forbearance was imposed on a national level.

1. How Many Homes Are in Forbearance?

Estimations suggest that around 1.6 million people are in forbearance. This figure is lowering as many people begin to exit the phase. However, it does not mean that they are exiting in financially secure circumstances.

2. Know Your Mortgage Forbearance End Date

The CARES Act provided relief to people struggling to pay a mortgage as an impact of the global pandemic. It did this by enforcing halts on mortgage payments. Any forbearance deferred as a result could also not result in a lump sum claim from lenders once the period ended.

Anyone with an FHA, VA, or USDA loan could request an initial forbearance for up to six months. Another extension for six months could also take place, up to a total of one year.

For anyone who requested these at the start of the pandemic, the period will soon be ending. If you required a six-month extension after the initial six-month period, it will end exactly a year after you requested the first forbearance period.

Once you exit, you need to create a strategy to make up the missed payments. This may include a new budget or sourcing payments from another source.

3. After Forbearance Payment Options

Once the mortgage forbearance extension is over, missed payments need repaying. The type of plan to pay them back depends on the loan you have. There is a wide range of options to suit each individual.

Most lenders have three options available. The first is a repayment plan that raises your standard monthly payments to make up for the shortfall. If you can’t afford this then the second option of deferral may be better, adding the payment to the end of the schedule.

The final option is a modification. This can change the terms of the loan including altering the length, interest rates, and amount.

Some lenders are also offering a COVID-19 standalone partial claim. Claims let you put the money you owe into a no-interest debt. Payment is only taken when you refinance or sell the property.

4. Selling a Home Is an Option

When leaving forbearance, there are several reasons people may want to sell their homes. Incomes may have declined, meaning selling the home is a way to eliminate mortgage payments and free up equity. Many people may want to move to lower-cost, more budget-friendly neighborhoods.

Luckily, it is a good time to sell. The property market is booming with higher prices and more potential buyers. In a seller’s market, you have the power to get the best value possible for your home.

For those who want a quick sale, Cash for Home companies are a great option. Deals with them can be turned around much quicker than traditional mortgage chain methods. This allows you to free yourself or mortgage commitments quicker and pay off your remaining debts.

5. Black and Hispanic Homeowners Have Been Most Affected

While many households have reported uncertainty about making the next month’s payments, Black and Hispanic households have been the worst hit. Between the 16th to 21st of July, nearly 21% of these households missed or deferred their mortgage payments. This is in contrast to 10% of white homeowners.

The trend can be followed throughout the pandemic. This shows a huge difference based on race and ethnicity.

6. How Will Forbearance Impact the Housing Market?

Predictions are that when the period of forbearance ends, a number of houses will enter the market increasing supply. This relies on the presumption that many people will choose to sell their homes.

This makes a lot of sense for owners, as they will find themselves relinquished from their mortgage. Around 25% of lenders who exit forbearance put their homes on the market once they leave.

Of course, these people still need a place to live and this has resulted in the soaring rise of rental prices. Assuming they do not buy another house this means a lot could be on the market. If you are choosing to sell, now may be the best time to do it before that happens.

Luckily, there has never been a better time to have equity in a property. With high prices and a glut of buyers on the market, sales can be quick and debts can settle fast.

Moving On

Now you know the state of mortgage forbearance, weigh up your options. Speak with your lender to see what they can do to help. Price up your current property and see the value in a possible sale.

If you want to sell fast, then Lisa Buys Austin Houses should be your first stop. We can make you a cash offer that can be closed within 7 days. Click here to see how the process works and contact our expert team.

Let's get started on your all-cash offer!

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