Important facts about Fannie Mae’s new repayment option
The health and economic impacts of the new coronavirus creates a financial hardship for millions of American families. As a result, many families have set up a mortgage forbearance plan in order to stay in their homes and regain their financial footing.
Mortgage forbearance is an agreement that lets homeowners reduce or suspend their mortgage payments for up to six months. The forbearance may be extended up to six additional months if the homeowner is unable to resolve their financial hardship. However, once the forbearance period ends, they will need to repay the mortgage payments.
Fannie Mae is offering repayment options for homeowners who missed their mortgage payments due to a financial hardship related to COVID-19. In fact, in May, we announced a new COVID-19 payment deferral. This option became available July 1.
How COVID-19 payment deferral works:
Once you either resolve your financial hardship or end your COVID-19-related forbearance, you will resume making your regular monthly mortgage payments. This payment option defers the amount you owe to the end of your loan term (the maturity date). You will have to pay the missed amount when you make your last loan payment or pay off the balance of the loan (e.g., when you sell or transfer the property or refinance your loan).
Advantages of COVID-19 payment deferral:
- It’s effective immediately. It does not require a trial period.
- It keeps your mortgage payment the same as it was prior to your COVID-19-related hardship.
- If your loan is covered under the CARES act, your loan should be reported as current to credit reporting companies if:
- You were current before receiving a forbearance plan or another accommodation related to COVID-19 and
- You made required payments under the forbearance plan or other accommodation.
- You will not be charged interest on the amount owed.
If the eligibility requirements for COVID-19 payment deferral don’t match your situation, you have other mortgage repayment options:
Every homeowner’s financial situation is different. If COVID-19 payment deferral isn’t right for you, consider talking with your mortgage servicer about the following alternatives:
A reinstatement means that you pay the total unpaid amount all at once at the end of forbearance.
Your mortgage servicer will speak with you about your mortgage loan reinstatement at the end of the forbearance plan. They will also talk with you if you did not have a forbearance plan, but your hardship has been resolved. Remember, this is only one of many options to discuss with your mortgage servicing company. This can be the best option if you are financially able to repay the missed amount all at once.
Your mortgage servicer may also speak with you about a repayment plan. A repayment plan takes the amount you owe and spreads it out over a fixed period of time. A repayment plan requires you to make your regular mortgage payment plus an additional amount each month to until the missed amount is repaid. At the end of the repayment plan, you resume your regular monthly mortgage payment.
If your ability to pay your monthly mortgage payment has been permanently impacted by a financial hardship related to COVID-19, your mortgage servicer can work with you to modify your mortgage loan. A loan modification permanently changes some of the terms of your mortgage. A loan modification may lower your monthly mortgage payment and/or your interest rate, but can cost more over the life of the loan due to an extended repayment term (new maturity date).
If you already have a mortgage forbearance plan, the options above can help you make decisions about your financial future. If you don’t have a mortgage forbearance plan, but think you might need one, talk with your mortgage servicer about your situation as soon as possible.
At Fannie Mae, we’re here to help you understand all the options that are available.
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