THE FORBEARANCE DILEMA OF 2021
Updated: Apr 16
Millions of Homeowners Find Their Homes Are at Risk.
"Many distressed homeowners with mortgages that are not federally backed have received pandemic-related forbearance, but in some cases it’s brief — three months, for example — housing counselors and homeowners say.
About 5% of non–federally backed loans were in forbearance as of late February 2021, according to Black Knight, consistent with the share of all mortgages that have been afforded such relief.
For homeowners who want to extend their forbearance periods, some servicers are requiring new documentation every month, which “creates an enormous amount of uncertainty and extra burden that really isn’t necessary,” says Lisa Sitkin, senior staff attorney at the National Housing Law Project.
The real trouble often starts when forbearance ends. Some servicers ask borrowers to repay the forborne amount in a lump sum or set up a monthly repayment plan that a homeowner can’t afford, while others offer borrower-friendlier options, such as deferring the forborne amount to the end of the loan term. Homeowners with Fannie Mae, Freddie Mac and government-backed loans aren’t required to make a lump-sum repayment when exiting a COVID forbearance, and they often have access to streamlined options that let them resume their prior payment schedules while deferring the skipped payments to the end of a loan term.
A sizable share of homeowners has recently exited forbearance with past-due payments and no loss-mitigation plan in place. In some cases that’s because servicers are having trouble contacting the borrowers or because it takes time to process modifications, says Mike Fratantoni, the Mortgage Bankers Association’s senior vice president and chief economist. In the week ending March 14, about 22% of non–federally backed borrowers and 20% of total borrowers who left forbearance were not current on their loans and had no repayment plan or loan modification in place, according to the association."
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