Understanding Forbearance

by Angie Fortier

Product Development Specialist - Lending

5.1.2020
|
Articles

Coastal understands that making a mortgage payment can be a concern for anyone who has recently been impacted by the coronavirus (COVID-19), which is why we are offering up to a 120-day forbearance on mortgage loans designed to ease the financial burden for those qualified members.

What is a forbearance?

Forbearance is a temporary reduction or suspension of your monthly mortgage payment. In addition You will not incur any late fees on this forbearance plan and we will not be reporting any "past-due" payments to the credit bureau during the forbearance period. It’s important to be aware that at the end of the forbearance period, all temporarily reduced or suspended payments will be due. 

For example: John has a monthly mortgage payment of $1,000 and opts for a forbearance in January. When the forbearance period ends in March, he will owe $4,000 on April 1st ($1,000 for April payment and $3,000 in back payments.  The payments have only been delayed or reduced, not forgiven. The borrow may shorten a forbearance plan term at any time to reduce the amount of payments which are being delayed or reduced.

How long can a forbearance last?

If you have been negatively  impacted by the coronavirus (COVID-19), Coastal may offer an extension of payments up to 6 months as needed.

If I get my job back, can I stop the forbearance plan?  I am only going to use this if I must.                                                                                                                                    

Yes, you may make payments and/or cancel your forbearance plan at any time. At the time of cancellation, you will be responsible to bring your loan current.

Will the 6 months of reduced or suspended payments be added to the end of my mortgage term? 

At the end of the maximum forbearance term, one of the following must occur:

  • The mortgage loan must be brought current through a reinstatement
  • The borrower is approved for another workout option
  • The mortgage loan is paid in full
  • The mortgage loan is referred to foreclosure in accordance with applicable law.

Why would I want a forbearance? There is no way I’ll be able to pay all those missed payments at the end of 6 months!

Forbearance is a first step toward reinstating your loan. It is a “time out” during which you are protected from late payment fees and negative credit reporting, allowing you to focus on dealing with employment and income.  The purpose of a forbearance is to give you peace of mind, right now, and give you the opportunity to earn an income and/or have an ability to re-pay again.

Will the forbearance impact my credit score?

No.  There will be no negative impact to your credit score during the time period of your forbearance term.   

However, the Fair Credit Reporting Act, FCRA, requires that we report the last status of your loan prior to the forbearance.  This must be reported monthly. For example: If your mortgage was current at the time of the initial forbearance, that status will carry over throughout the term of your forbearance. If your loan was delinquent at the time of the initial forbearance, that status will carry over per FCRA requirements.

During the forbearance plan, what happens to the interest on the mortgage loan?

During a forbearance plan, interest is not paid but still accrues. After the forbearance plan is complete, if the borrower is approved for another workout option, the type of workout option offered will determine how the interest is handled.

My property tax and homeowner’s insurance are paid in escrow. What are the implications of this during the forbearance? Will these still be paid with the amounts I have paid into escrow over the last several months? Will I have to pay them directly since I won't be making mortgage payments? Is it possible to pay just the escrow amount on the loan while in forbearance

You may choose to pay your taxes insurance on your own. If you are escrowed, Coastal will pay your scheduled taxes and insurance out of your available escrow funds. You will be responsible to pay any shortages or deficiency in your escrow. If you can make escrow payments, Coastal will apply those accordingly to minimize the possibility of shortage.

If my situation changes and I can return to work, how do can I resume normal payments? 

Contact Mortgage Servicing at MortgageServicing@Coastal24.com or call 919-420-8110

Why does my online account show my next mortgage payment is still due on the 1st of the month?

In a forbearance, your due dates will remain the same. Forbearance will suspend any adverse activity against your loan while you can work to improve your situation to bring your loan current again. 

Why can’t I reset/modify/tack the payments on the end of my loan now?

In order to make sure the new terms fit your situation, we will want to work with you to evaluate the payments and term against your restored income/employment. Once those are in place, we can begin that reset. Forbearance is designed to give you time to get ready. Prior to restoring employment or income, the only solution that we can offer is a forbearance, or option where home retention does not occur (short sale or deed in lieu).

Will you suspend foreclosures for borrowers impacted by COVID-19?

In compliance with the CARES Act, if you are on a forbearance plan, Coastal will suspend foreclosure related activity on your loan for the term of the forbearance agreement.

For more information, visit the CFPB’s CARES Act Mortgage Forbearance page.

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