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COVID-19 mortgage relief brings uncertainty, confusion for struggling homeowners

The CARES Act allows homeowners to delay mortgage payments, but is doing so the right thing to do? We asked experts.

DENVER, Colorado — The U.S. has not seen job loss like this since the Great Depression. In turn, millions have already taken advantage of the CARES Act, which allows homeowners to delay mortgage payments. 

But, many of those homeowners are concerned about what they'll owe when their forbearance period ends.

“I have been a little bit depressed," said Denver resident Jill Duncan, who lost her job because of the pandemic. "I was at my old job for five-and-a-half years. It paid well. I enjoyed it.

"I can miss three payments, but the bad thing is, when the forbearance is over, I have to pay those three payments, plus the one that will be due at that time. That would be several thousands of dollars I would have to pay at once. And that’s not very helpful." 

While forbearance on government-backed loans is required during these trying times, It's up to banks to decide how often payments can be missed and how the will recoup those payments.

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Some, like Duncan's, want it all at once. Others will increase the cost of future mortgage payments. If you're lucky the loan servicer will add payments interest-free to the end of the mortgage. The CARES Act prevents banks from incurring late fees or reporting missed payment to credit reporting agencies for loans currently in forbearance.

Jim Nolte is a Branch Manager for Celebrity Home Loans. His best advice is to pay your mortgage if you can, avoiding those higher payments. He says it could also impact future loans.

“It is a question that’s asked and it could disqualify you if you’re in a current forbearance program on a new loan,” said Nolte, who suggests considering refinancing for a potentially lower interest rate instead of entering forbearance. “You can potentially skip two months payments and roll any of the costs of the refinance into your mortgage.”

But if you can't avoid it, get in contact with your loan servicer and start asking questions. Before committing, make sure you understand how long your bank allows forbearance to last, what you’ll owe and when it’s expected to be paid.

One of the most important questions many unemployed people can ask is,
"what if I can’t pay when my forbearance is over?" Homeowners may be able to work with their loan servicer to obtain a loan modification. While banks cannot currently foreclose on government-backed mortgages, a modification may relieve some stress down the line.

Duncan moved forward with forbearance as she's run out of options. She's looking for a job but if that doesn't happen she's hoping her bank will work with her.

“I am really in the dark until it becomes time to pay that loan or tell them I can’t pay that lump sum, and hopefully they’re willing and able to work with me,” Duncan said. “But right now it’s a little scary because I don’t know what would get approved in the future.”

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