Mortgage Forbearance and Your Credit

Blog Post07/23/2020
Credit Advice Financial Hardship
Mortgage Forbearance and Your Credit

With many people financially affected by COVID-19, almost a quarter (24%) are worried about their ability to pay their mortgage. To help those in need, federally backed loan servicers and some private lenders are offering mortgage forbearance during this economically difficult time.

Mortgage forbearance during COVID-19

When in forbearance, your lender lets you temporarily pause or reduce your monthly payments. Under the CARES Act, federally backed mortgages are eligible for up to 180 days of forbearance. Federally backed mortgages include loans from Fannie Mae, Freddie Mac, Federal Housing Administration (FHA), Veteran’s Affairs (VA) and U.S. Department of Agriculture (USDA). Interest will still accrue on these loans, but you won’t be charged any extra fees. You also don’t need to provide any documentation to enroll. For more information about forbearance plans for federally owned mortgages, read the Consumer Financial Protection Bureau (CFPB) guide to mortgage relief options.

The federal government backs most mortgages, but if you have a loan through a private lender, you may still have options. Many private mortgage providers are also offering flexible payment plans for customers. Private lender plan terms vary, so contact your lender directly for specific information. If you’re not sure who your lender is, you can enter your information into the Mortgage Electronic Registration System to find out.

Forbearance and your credit

Before you agree to a forbearance plan with your lender, be sure to find out how they will report your account to the credit reporting agencies. Lenders can report in different ways. For example, some may add a remark to note your account is in forbearance or has been affected by a declared disaster. Ask your lender:

  • how your account status will be reported
  • how missed or reduced payments will be reported
  • what remarks or terms they may add to your account

As your credit reports are updated, check them regularly. Make sure the information is accurate and reflects your forbearance agreement. Through April 2021, the three nationwide credit reporting agencies are offering free weekly online access to your credit reports at annualcreditreport.com. If you see something on your report you weren’t expecting, like a missed payment even if you’ve entered into forbearance, you can contact your lender directly to get details.

Mortgage relief programs are not loan forgiveness, so find out how you’ll need to make up paused payments when the forbearance period ends. Lenders may offer options like adding an extra amount to your monthly payments or extending the life of the loan. Make sure you choose a repayment plan that will work for your financial situation.

Should I enter a forbearance agreement?

Whether to enter into a forbearance agreement is a personal decision. If your household finances allow you to keep making payments, you should. This can help you avoid paying extra interest. To help protect your credit health, contact your lender before you miss a payment. If you’ve already missed one, don’t let that stop you from reaching out to get support for upcoming payments. Finally, be sure you fully understand your forbearance agreement and get it in writing.

If you need help, please ask for it. Our study found that 13% of people with mortgages have received accommodations from their lenders. These plans are available to help you protect your credit health and temporarily make your monthly budget more manageable.

Find additional information on forbearance plans and your credit for the following loan types:

Disclaimer: The information posted to this blog was accurate at the time it was initially published. We do not guarantee the accuracy or completeness of the information provided. The information contained in the TransUnion blog is provided for educational purposes only and does not constitute legal or financial advice. You should consult your own attorney or financial adviser regarding your particular situation. For complete details of any product mentioned, visit transunion.com. This site is governed by the TransUnion Interactive privacy policy located here.

What You Need to Know:

There are various types of credit scores, and lenders use a variety of different types of credit scores to make lending decisions. The credit score you receive is based on the VantageScore 3.0 model and may not be the credit score model used by your lender.

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