The coronavirus pandemic has been hard on homeowners, some of whom have struggled to keep up with their mortgage payments. Thankfully, relief has been available since late March. Thanks to the CARES Act, homeowners have the right to ask their mortgage lenders to put their home loans into forbearance -- first for 180 days and then for a 180-day extension. All told, homeowners can hit pause on their mortgage payments during the pandemic for up to 360 days and it won't count as negative activity on their credit reports.
However, new data from Black Knight reveals there are now fewer home loans in forbearance than earlier in the year. As of Oct. 20, there were 2.98 million borrowers with active forbearance plans, which represents 5.6% of the country's 53 million active home loans. And that could mean more Americans are in a better place financially now than they were in previous months.
Do fewer loans in forbearance mean our economy is recovering?
The U.S. economy still has a long way to go to reach its pre-pandemic level, but there have been a few encouraging signs pointing to a gradual recovery. For one thing, the unemployment rate has been declining steadily since reaching a record high in April, and now, forbearance numbers are dropping as well.
Many homeowners who put their mortgages into forbearance earlier in the year have seen their initial 180-day period come to a close. But many of those plans that expired in September have not been renewed. That indicates that some homeowners' finances have improved and that they can keep up with their mortgage payments again.
Should you put your mortgage into forbearance?
If you're having a hard time paying your mortgage, you may be thinking of putting your loan into forbearance. If you do, the payments you skip won't be forgiven; you'll need to make them up once your forbearance period ends.
Forbearance is a better route than missing payments and being reported as delinquent on your credit report. And remember, if you miss too many payments, your lender could seek to begin the foreclosure process.
But if you can mostly make your mortgage payments and just need a little relief, you may be able to negotiate the terms of your repayment schedule rather than pause your payments completely. That's why it pays to reach out and have that conversation. Your lender will walk you through your options based on your financial situation, and together, you should be able to arrive at the best solution.
Another possible option? Refinance your mortgage. If your credit score has remained strong despite financial difficulties, you may be eligible to substantially lower your interest rate to reduce your monthly payment.
Fewer mortgages in forbearance is an encouraging sign -- but if you need to put your home loan into forbearance, don't feel bad about it. Getting a few months' reprieve could help you avoid compromising your credit or losing your home as you get back on your feet, and at a time like this, there's no shame in admitting that you need assistance.
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