The initial Jobless Claims report came out last week, indicating almost 10 million individuals claimed unemployment over the last two weeks. Sadly, we know that this number will continue to grow as the coronavirus continues its impact on businesses across the country.
To try to help with these unemployment rates, the federal government passed the CARES Act which allows borrowers who are unable to repay their mortgage to enter a forbearance period with their loan servicer. Essentially borrowers can contact their servicer and request a “pause” or a forbearance period where they will not be penalized for any missed payments. Despite this “pause”, borrowers will have to make up for their missed payments, which is handled differently from servicer to servicer. Some have announced that the missed payments will be tacked onto your outstanding loan balance, others have said that the full amount of missed payments will be due after the forbearance period has ended.
The most important thing to keep in mind with payment forbearance is that it does NOT happen automatically. Borrowers MUST speak with their servicers to determine their options. This forbearance period can be very helpful for those affected by income loss or other financial hardship, but if you do not need to use this tool, then it is advised to continue making your payments.
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By: Jon Iacono