If you’re feeling a little fuzzy on exactly what options are available for homeowners who are financially impacted by the COVID-19 Pandemic, it’s not your fault.
There are a lot of myths floating around right now about what homeowners are entitled to and what they should expect. A lot of different people are saying a lot of different things. It’s confusing. In fact, parsing out the truth is practically a full-time job. Specifically: It’s our full-time job. So, allow us to clear up a few of the most common COVID-19 mortgage myths, starting with the flashiest.
MYTH #1: Mortgage payments will be “waived” or “forgiven”
REALITY: Not true. This rumor probably began due to some inaccurate (though well-meaning) statements by various state governors and officials made before official programs were in place. While you might have heard rumors about “waived payments” or “90-day grace periods,” those aren’t exactly true. In fact, what’s actually being offered in most cases is a forbearance—and certainly not an elimination of any payments due.
See: The Executive Order from New York, The Executive Order from California, and most explicitly, The Executive Order from Illinois (“No provision contained in this Executive Order shall be construed as relieving any individual of the obligation…to make mortgage payments…”).
With a forbearance, payments can be paused to help homeowners through a financial crisis. However, at the end of the forbearance, the paused payments will be due (if that sounds out-of-the-question, don’t worry—read more below).
To learn more about the forbearance program that’s available for homeowners affected by COVID-19, click here.
MYTH #2: Skipped payments can simply be tacked onto the end of my loan
REALITY: Not 100% true. Some banks are offering this as an option for loans they own. But the vast majority of mortgages in this country are government backed (i.e., they’re owned by major investors like Fannie Mae, Freddie Mac, or they are FHA, VA, USDA). For those mortgages—and this includes nearly all Mr. Cooper mortgages—deferring payments to the end of the loan is not automatic.
Instead, they’re offering forbearance as an option for homeowners who can’t pay their mortgage due to COVID-19. While any payments not paid during a forbearance will need to be repaid once the forbearance ends, you can count on your servicer (if you’re a Mr. Cooper customer, that would be us) to help you find a long-term solution.
Which brings us to Myth #3…
MYTH #3: A forbearance plan is useless to me if I can’t afford to pay back the entire amount right away
REALITY: While it’s true that all paused payments are due at the end of a forbearance, it is not true that repaying it in one lump sum is the only option. Your servicer (again: if you’re a Mr. Cooper customer, that’s us) will work with you to find a manageable way for you to pay back the amount you owe due to the forbearance plan. There’s not a one-size-fits-all solution but these options usually include:
A repayment plan — Over a set number of months (typically 3–6), an extra amount will be added to your regular mortgage payment to cover the amount owed from the forbearance.
A loan modification — If you qualify, your loan’s terms (which could include interest rate, term) may be adjusted to provide an affordable payment and cover the amount owed. This may include an extension at the end of the loan giving you additional months to pay.
A payment deferral — A payment deferral allows a lender or servicer to push a set number of paused or missed monthly mortgage payments to the end of the loan. The deferred payments can typically be paid back by making one lump sum payment when the loan matures or is otherwise paid off.
(See also repayment plan, loan modification, and payment deferral in the Mr. Cooper Glossary.)
To see how Mr. Cooper is helping homeowners through the COVID-19 pandemic, visit our COVID-19 Resource Center.
