There are some 4.1 million American homeowners participating in forbearance programs since they were made more widely available under the CARES Act. And while that number is shrinking, as of July 5 over eight percent of all active mortgages were included in some type of government or private-sector forbearance plan.
But those in private programs do not have the same protections as mortgages that are backed by the federal government. CNBC reports that about 30 percent of U.S. mortgages are not backed by any federal agency, and just under 11 percent of those are in a forbearance program.
Research conducted by CNBC with 16 major banks that have set up forbearance programs found that while those programs generally follow federal guidelines, the terms of the agreements and repayment options vary from bank to bank.
There are generally three options offered by banks:
- A repayment plan under which homeowners pay an additional amount each month to cover skipped months.
- A deferment plan. This option adds additional months to the end of the loan, or may be due as a lump sum as defined by the agreement. That may be at the end of the loan period, or much sooner.
- A loan modification. This allows borrowers to restructure things like their interest rates, loan terms, or amount of monthly payments.
It is important to note that not every bank is offering all of these options.
So when you consider a forbearance program with a private lender, be sure that you understand that there may be a large balloon payment coming at a time when you may least be able to afford it. And also know that if your financial situation is particularly dire, you may not qualify for the program at all.