If you’re a homeowner suffering financial hardship because of the COVID-19 restrictions and you’re struggling to pay your mortgage, you may be wondering what your options are.
“The first thing you should do if you’re having trouble paying your mortgage is to contact your servicer, which is the company listed on your mortgage statement. They will be familiar with your circumstances and can help you understand your options,” says Rob Greenbaum, Chief Sales Officer of AAFMAA Mortgage Services LLC (AMS).
If you are having financial difficulties as a result of COVID-19, you may qualify for a payment deferment also known as a forbearance.
“A payment deferment allows a qualified borrower to skip a payment for up to three months,” explains Greenbaum.
To qualify, you will need to complete a hardship application and provide documentation to support your situation, such as an unemployment claim or bank statements to show reduced income.
After the deferment period, you will need to make arrangements with your mortgage company (servicer) to pay back the skipped payments over an agreed upon time period – referred to a repayment plan. Plus, you will need to resume your normal monthly payments, in addition to the prior skipped payments spread out over the agreed upon timeframe..
A repayment plan may range from one to 12 months. “Your past due or skipped payment is then divided by the number of months and added to your regular monthly mortgage payment amount,” says Greenbaum.
The borrower can pay the deferment balance ahead of schedule, too. For example, let’s say your monthly mortgage payment is $1,200, including the principal, interest, taxes, and insurance. If you skip one month’s payment, then when you resume making payments, the skipped payment of $1,200 will be divided over 12 months ($1,200 divided by 12 = $100). Therefore, your new mortgage payment will be $1,300 ($1,200 + $100) for the next 12 months to catch up.
There is no additional interest charged to defer a mortgage payment, and there is no lump sum to pay. “However, if the borrower fails to make scheduled payments, after the deferment period, within 15 days of the due date, the repayment plan is void and the borrower may be charged late fees and interest charges as applicable according to the borrower’s original mortgage note,” Greenbaum says.
How Your Credit May Be Affected
The Department of Veteran Affairs (VA) has urged mortgage servicers to consider suspension of credit reporting on borrowers who are affected by COVID-19 to avoid damaging credit records.
“AMS has adopted this policy as long as the borrower makes timely payments according to their deferment plan,” says Greenbaum.
However, missing or late payments will affect your credit score and limit your mortgage options, including your ability to refinance in the future. “The key is communicating with your servicer so you can work together on a plan that will safeguard your credit and keep you in your home,” Greenbaum says.
We’re Here to Help
For more information about how AAFMAA continues supporting the military community during the COVID-19 crisis visit www.aafmaa.com/COVID19.
If you mortgage is owned and serviced by AAFMAA Mortgage Services LLC and you need assistance or have a question, please contact us.