LOUISVILLE, Ky. (WAVE) - Amid the coronavirus pandemic many homeowners have found themselves struggles to make ends meet.
Many states posted record-high numbers of people with little to no income in the wake of losing their job to the virus.
Kevin Palmer, Senior Vice-President of Single-Family Portfolio management at Freddie Mac, stresses homeowners need to educate themselves about the short-term financial relief available to them during these tough times.
“Right now, during this pandemic, there’s a lot of protections made available to borrowers,” Palmer stresses. "It’s so important for these struggling homeowners to understand the options they have.
One option is forbearance.
“What forbearance is essentially is a way to pause your mortgage payments while you’re having a hardship,” Palmer explains. “It allows borrowers time to get back on their feet again.”
Forbearance does not mean your payments are forgiven or erased. You are still required to repay any missed or reduced payments in the future. Usually, those are repaid over time. This process also protects your credit score.
Lenders have also made plans to work with people strapped for cash by offering federal loans including home mortgages.
“It’s executed in a very streamline way really,” according to Palmer. “It’s just a conversation that the borrowers have with their mortgage company. There’s no paperwork required.”
Contact your loan servicer immediately if you are struggling to make your mortgage payments or believe you may fall behind on your payments.
“They can also work with their mortgage company so they can restructure that current mortgage in a way that allows a lower mortgage payment on a go-forward basis,” Palmer explains. “The Cares Act requires servers to continue to report borrowers as current to the credit bureau so that way your credit is not impacted.”
The first step and most important step is reaching out to your lender.
“If you don’t get in contact with your lenders and you just start missing those payments those protections are not made available,” Palmer explains.
Palmer also stresses that there are several post-forbearance options for homeowners with Freddie Mac. The same options may be offered by your lender.
· Reinstatement: The option for a lump sum payment is available, but never required if your loan is owned by Freddie Mac. It is the fastest way to get back on track If possible.
· Repayment plan: You pay more each month on top of your existing mortgage payment to make up the missed payments.
· COVID-19 Payment Deferral: This option is available if you can resume making your regular monthly payment. With payment deferral you become immediately current on your mortgage and missed payments are added to the end of the mortgage term without interest or penalties.
· Loan modification: A modification may be the option that’s best for you If you’re facing a long-term financial hardship but can make a reduced mortgage payment.
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