What to do if you face balloon payments on your mortgageMay 6, 2020
How new legislation, CARES Act will affect mortgages on your home during COVID-19 pandemic
Many homeowners struggling financially during the coronavirus pandemic are worried that mortgage servicers are now requiring them to repay postponed mortgage bills all at once after allowing them to put off those payments under the CARES Act.
The Consumer Financial Protection Bureau, however, has called on mortgage servicers to clear up the confusion over the issue since consumers can put off payments — a process known as forbearance — for up to a year due to the new act. The law, however, doesn’t specify what happens after forbearance ends, which has led some mortgage services to warn borrowers they will have to make balloon payments.
“We’re seeing a significant increase in complaints from borrowers,” Kathleen L. Kraninger, director of the CFPB, said Friday during a call with reporters. “There’s a crystal clear line on the lump-sum payment issue. They’re not going to have to pay it if they can’t pay it.”
In April, the CFPB received 42,774 complaints, the highest number in the history of the bureau’s complaint system and about a 15% increase from March.
Topping the list of coronavirus related complaints were concerns about mortgages and credit cards. Consumers were typically concerned about their ability to pay a lump sum once their mortgage forbearance ends. About 60% of the mortgage complaints related to the coronavirus are from people struggling to pay their home loans, Kraninger said.
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The bureau is working with the Department of Housing and Urban Development, which oversees the Federal Housing Administration, to streamline information to borrowers so that they know their rights, Kraninger said.
“If a consumer still has a concern and if they don’t seem to be getting relief they need, they can come to us,” Kraninger says. “We’ll take an aggressive posture against those who are not accommodating consumers the way they should.”
How do I get forbearance?
Forbearance allows you to pause or reduce your mortgage payments, but you still have to repay those missed payments in the future.
To receive forbearance through the CARES Act, you must contact your loan servicer. Homeowners who are struggling financially because of the pandemic can request a forbearance for up to 180 days, which may be extended for an additional period of up to another six months if borrowers are still under financial duress.
This relief applies only to federally backed mortgages. If you don’t have a federally backed mortgage, some loan servicers may have forbearance or deferment options for non-government-backed…