For homeowners who have been struggling to pay their mortgage due to coronavirus-related shutdowns, the ability to delay their payments through mortgage forbearance programs has been a huge relief.

But six months into the pandemic, many people who agreed to put their payments on hold will now need to decide whether to extend their time in a forbearance program or negotiate a payment plan with their lender to pay the deferred amount back.

The CARES Act gave struggling homeowners with government-backed loans six months to defer mortgage payments. Those people who remain in good standing with their lender are eligible for another six months, or up to a full year of deferred payments, if needed. The bill also does not allow fees, penalties or additional interest to be charged as a result of delayed payments.

There are currently 3.8 million homeowners in forbearance, down 21% – or about 1 million homeowners – from the peak in May, according to Black Knight, a mortgage data company. About half a million borrowers ended forbearance plans over the past month while another half a million extended the program.

More than 2 million coronavirus-related forbearance plans are now set to expire in September, according to Black Knight, setting up an important window for homeowners to check in with their lender and make a plan for what comes next.

Exiting forbearance and making a payment plan

If your immediate economic hardship has resolved – say you’re back to work or you feel secure about your job – you are likely ready to exit forbearance and speak with your lender about how to repay what you owe.

“If you have gotten back into a new reality, then it will be a conversation around what your circumstances are,” said Malloy Evans, senior vice president and chief credit officer at Fannie Mae, which backs loans covered by the CARES Act. “Could you pay what you were paying before forbearance? Or could you pay a little more a month?”

Evans stressed that those covered by the CARES Act are not required to pay the deferred amount in one single balloon payment. “They definitely do not need to pay everything back at once,” he said. “We have multiple options available to tailor it to individual circumstances.”

However, if you have that lump sum available, making one large payment can be the tidiest resolution of the deferment, said Teresa Murray, director of the Consumer Watchdog program at the US Public Interest Research Group.

“If you can pay it and get caught up, it would be a net zero on your credit report and you wouldn’t need a loan modification and your payments would remain the same,” Murray said.

But many people don’t have the money on hand to pursue that option. If you can manage to pay a little more each month, you could make a repayment plan with your lender, Evans said. “You’ll get back to paying your regular mortgage payment and add on a little bit each month over 12 months to pay the deferred amount.”

If you really need to keep your monthly payments the same or even lower than they were prior to the forbearance, you could ask for a loan modification, which will add the amount you owe to the end of the loan.

Borrowers whose loans are not government backed will have a different set of options. You may be required to pay the deferred amount all at once and you are not guaranteed the opportunity to extend your forbearance for another six months. But check with your lender first. Many are extending similar options to their borrowers.

Extending forbearance

If you’re still struggling financially, you may opt to extend your forbearance plan for another six months.

“The good news is, under our policy, there is 12 months of relief available if you need it,” said Evans.

But extending your forbearance will require you to speak with your servicer and confirm that you’re eligible.

Even if your hardship has passed, you’ll want to be certain you are ready to regularly make payments if you exit your forbearance plan.

“People have been out of work, maybe sick, with kids at home, their whole lives are disrupted,” said Murray. “If you don’t know what to do and don’t have the mental bandwidth to make a decision now, extend your forbearance protection.”

Take the forbearance extension and put the monthly payments in your own bank account for a few months, she said. “Use the next month or two to figure out what is next.”

When you decide to exit forbearance, you can tell your lender you can make two months of payments and you want to have a plan for the remainder, for example, Murray said.

Know your plan before talking with your lender

Homeowners with loans covered by the CARES Act are supposed to be contacted no later than 30 days prior to the end of their forbearance period. Those with privately held loans will likely be contacted in a similar fashion.

But consumer advocates say if you know what you want to do, there is no need to wait for a call.

“If I were in forbearance, I would not wait for my lender to contact me,” said Murray. “This is too important to be passive about. I would encourage people to be proactive.”

She encourages borrowers to make notes of the calls you have with your servicer – the date, who you spoke with and what was discussed.

“Be sure you know when to expect a packet with the information you discussed and when you should expect to hear from them again,” she said.

If you don’t know whether you have a government-backed loan, you can check Freddie Mac’s or Fannie Mae’s web sites or use this loan lookup tool. If you have trouble with your servicer, you can report your issue in the Consumer Financial Protection Bureau complaint database.

“It is absolutely a priority to keep people in their homes,” said Evans. “These tools are intended to give people a way to get on their feet. Our primary goal is to avoid foreclosure and ensure people can stay in their homes.”