Does Mortgage Forbearance Affect Your Credit?

While your health and welfare are top priorities during the COVID-19 pandemic, you may also be concerned about how current economic conditions can impact your financial situation.

Last week, we discussed the major points behind mortgage forbearance. Offered through the newly passed federal government CARES Act, forbearance is when your mortgage servicer or lender allows you to temporarily pay your mortgage at a lower payment or pause paying your mortgage. However, this could also mean that you could owe those payments as a lump sum at the end of the agreed-upon period with your lender.

Consumers who are experiencing a financial hardship may be wondering how potentially late or reduced payments might impact their credit scores. In a normal, non-pandemic world, late or missing mortgage payments can damage your credit. But what if you agreed to forbearance terms with your mortgage lender? The short answer is maybe.

For Fannie Mae and Freddie Mac plans, late payments from mortgage forbearance will not be reported to credit bureaus by the loan servicers, and any late fees and other penalties will also be waived as long as you were up-to-date on your payments. If you are unsure if Fannie Mae or Freddie Mac owns your mortgage, you can check online via these websites.

Fannie Mae: knowyouroptions.com/loanlookup

Freddie Mac: ww3.freddiemac.com/loanlookup/

In addition to Freddie Mac and Fannie Mae, there are other federal mortgages that are eligible for relief under the CARES Act:

• Federal Housing Administration
• Department of Housing and Urban Development
• Department of Agriculture
• Department of Veterans Affairs

If you determine that your mortgage is not a federal loan, it is crucial that you contact and negotiate directly with your loan servicer. However, it is also important to note that none of these mortgage relief options are automatic, according to the National Housing Law Project.

In order to take advantage of these available mortgage relief options, you must contact your mortgage servicer directly. Be persistent and diligently follow-up to stay on top of your request. Also, watch for any new additional programs from your mortgage servicer which could require you to re-apply. Finally, make sure that your loan servicer provides you with written documentation that confirms the details of your agreement, and monitor your monthly mortgage statements and your credit to make sure you don’t see any errors.

Do you have questions about your specific circumstance? Contact one of our loan officers today for guidance!