In uncertain economic times, many homeowners face unexpected challenges—job loss, medical emergencies, or natural disasters—that can strain their ability to meet monthly mortgage obligations. These hardships can quickly spiral into financial distress and the fear of foreclosure. Fortunately, mortgage forbearance and relief programs exist to provide temporary relief and help homeowners regain control.
At SmartKey Lending, we are committed to helping clients understand their options during periods of hardship. This guide explores mortgage forbearance, alternative relief programs, and how you can protect your home while navigating tough times.
What Is Mortgage Forbearance?
Mortgage forbearance is a temporary pause or reduction in your mortgage payments, granted by your lender due to financial hardship. During the forbearance period, the borrower is not required to make full monthly payments, though interest may continue to accrue.
Forbearance does not erase what you owe, but it provides breathing room so you can avoid default or foreclosure while you work on improving your financial situation.
Common Reasons for Requesting Forbearance
Job loss or reduction in income
Medical emergency or illness
Natural disasters (floods, hurricanes, etc.)
Divorce or separation
National emergencies or pandemics (e.g., COVID-19)
Military deployment or service-related transitions
If your income has been disrupted or your expenses have spiked due to one of these events, a forbearance agreement could be the right temporary solution.
How Mortgage Forbearance Works
Once you request forbearance from your lender or loan servicer, you typically:
Submit a hardship letter or application, explaining your situation.
Provide any supporting documents, such as proof of unemployment, medical bills, or reduced income.
The lender reviews your request and offers a forbearance plan—typically 3 to 6 months, and sometimes extendable up to 12 months.
During the forbearance period, your payments are paused or reduced.
Once the forbearance ends, you’ll repay the missed payments using a plan determined by your lender.
Types of Forbearance Repayment Plans
It’s critical to understand how the missed payments will be repaid after the forbearance period. The most common options include:
1. Lump-Sum Repayment
You repay the full amount of missed payments in one lump sum. This option is not mandatory for federally backed loans but may be offered by some private lenders.
2. Installment Plan
The missed payments are divided and added to your regular monthly payments over a set period—typically 6 to 12 months.
3. Loan Modification
Your lender restructures your loan by extending the term, lowering the interest rate, or modifying the payment structure to make it more affordable long-term.
4. Deferred Payments
Missed payments are moved to the end of the loan term without interest or penalties, due when you sell or refinance the home, or upon loan maturity.
Forbearance for Government-Backed Loans
Homeowners with federally backed mortgages (FHA, VA, USDA, Fannie Mae, or Freddie Mac) may qualify for additional protections and structured forbearance options:
FHA Loans: Offer COVID-19 recovery and natural disaster forbearance plans.
VA Loans: Veterans can request payment relief through the VA Disaster Forbearance program.
USDA Loans: Special forbearance options and loan modifications are available.
Fannie Mae/Freddie Mac Loans: Follow standardized forbearance plans and no lump-sum repayment is required immediately.
At SmartKey Lending, we help clients determine whether their mortgage is federally backed and what relief programs are available.
Mortgage Relief Alternatives
If forbearance isn’t the right solution, there are other relief programs and hardship options worth considering:
1. Loan Modification
If you’re experiencing long-term financial difficulty, you may be eligible for a permanent change in the terms of your loan. This might include:
Lowering the interest rate
Extending the loan term
Converting from an adjustable-rate mortgage (ARM) to a fixed-rate loan
2. Refinancing
In cases where your credit and equity are intact, refinancing your mortgage into a lower monthly payment can provide sustainable relief—especially if interest rates have dropped.
3. Partial Claim (for FHA Loans)
FHA borrowers may qualify for a partial claim, which is a one-time interest-free loan from HUD to bring the mortgage current, payable when you sell or refinance.
4. Repayment Plan
If your hardship was brief, your lender may allow you to catch up by adding a portion of the missed payments to your regular payment over several months.
5. Selling the Home
In situations where keeping the home is not financially feasible, a sale might be the best option—especially if you have equity. This can help you avoid foreclosure and protect your credit.
6. Short Sale or Deed-in-Lieu of Foreclosure
If your home is worth less than what you owe and other options fail, your lender might agree to a short sale or accept the deed instead of foreclosing.
Will Forbearance Affect Your Credit?
During the COVID-19 crisis, the CARES Act protected credit scores for borrowers in forbearance. Under normal conditions:
Forbearance itself may not hurt your credit score if you’re approved and remain in good standing.
However, missed payments without a formal agreement will be reported as delinquent, damaging your credit and increasing foreclosure risk.
Always get forbearance terms in writing and verify how your loan servicer will report your status to credit bureaus.
Important Tips During Forbearance
Stay in communication with your lender: Don’t let the forbearance expire without a plan.
Budget wisely: If possible, continue making full or partial payments to reduce your debt later.
Track your documentation: Keep copies of all communications, agreements, and payment history.
Monitor your credit report: Ensure your account is being reported accurately.
How SmartKey Lending Can Help
At SmartKey Lending, we believe in empowering borrowers during life’s most difficult transitions. Whether you’re dealing with a job loss, medical emergency, or sudden drop in income, we offer personalized support to help you:
Understand your mortgage relief options
Navigate forbearance and repayment planning
Explore refinancing or loan modification
Protect your credit and avoid foreclosure
We don’t just offer loans—we build solutions.
Final Thoughts
Financial hardship can feel overwhelming, but it doesn’t have to lead to foreclosure. Mortgage forbearance and relief options are designed to give you time, flexibility, and peace of mind.
Whether you need short-term help or long-term restructuring, SmartKey Lending is here to guide you through every step with clarity and compassion.
