Mortgage servicers took their time last spring advising customers affected by the pandemic about their right to hit the pause button on making payments with no documentation required and no penalty charged to get back on track.

Now that most of those borrowers are preparing to resume making payments, mortgage servicers are again facing criticism for not being forthcoming with customers about their options.

Because those borrowers typically have less equity to work with, consumer advocates say they will need to take the initiative to work out a payment resumption plan with their mortgage servicers — which include traditional banks and other payment processors. Help is available from volunteer legal aid organizations and federally funded housing counselors.

“This is often very complicated stuff,” said Mike McArdle, assistant director of mortgage markets for the Consumer Financial Protection Bureau. “What is a deferral? What is a modification? What are term extensions? It’s important for borrowers to understand what is going on with their loans.”

The Biden administration has extended the forbearance period through Sept. 30 and the foreclosure moratorium through June 30. Forbearance is when your mortgage lender allows you to pause or reduce payments for specified period of time.

What borrowers are saying

The Consumer Financial Protection Bureau reported that in March, it received the largest number of consumer complaints about mortgages since April 2018. Complaints mentioning forbearance or related terms reached their highest monthly average since spring 2020, when consumers seeking forbearance protection made available for borrowers of federally backed loans first began reporting that they were getting inaccurate information from mortgage servicers.

Andrea Bopp Stark, an attorney at the nonprofit National Consumer Law Center, says some mortgage servicers are again providing confusing and contradictory information about borrowers’ options for resuming payments on federally backed loans. Some servicers of private market loans not subject to federal requirements are requiring borrowers to pay back missed payments in a lump sum or make monthly payments over a couple of years, she said.

Although bound by the foreclosure moratorium, private-market lenders are not required to provide any affordable post-forbearance options, Stark said. She’s aware of one consumer who had to borrow $30,000 to get current and another who had to dip into his retirement account.

Meanwhile, some servicers of Federal Housing Administration loans aren’t properly offering to defer missed payments to the end of the loans or offering modifications that could lower borrowers’ monthly payments if they can’t afford to pay the pre-pandemic amount, she said.

The opportunity for the roughly 70% of borrowers with federally backed loans to suspend mortgage payments for up to a year was part of the first pandemic relief act in March 2020. In February, it was extended through September by the entities that control the loans, including Fannie Mae, Freddie Mac, the Department of Agriculture, the Federal Housing Administration and the Department of Housing and Urban Development.

An estimated 6.5 million home loan borrowers have missed at least one payment since March 2020, according to the Mortgage Bankers Association. By July, about 8.5% of U.S. borrowers were in forbearance programs.

Forbearance and delinquency rates have gradually fallen since the country began to reopen last summer. By January, the most recent month for which data was available, 5.6% of borrowers were still behind on their payments.

Consumer bureau on the case

This past March, borrowers reported experiencing communications issues about their forbearance plans and options available at the end of the forbearance periods, the Consumer Financial Protection Bureau said.

The bureau warned that it would be closely monitoring mortgage servicers’ compliance with requirements to contact borrowers before their forbearance periods expire to give them time to apply for help, work with them to make sure they have all necessary documentation to obtain help, promptly respond to inquiries, and evaluate income fairly.

Also, the bureau said it will look carefully at how mortgage servicers manage communications with borrowers with limited English proficiency.

Options for borrowers with federally back loans

About 70% of all borrowers have home loans backed by one of the federal entities. Those borrowers must be given options appropriate to their financial situation. While details may vary, borrowers generally will be offered these options:

  • Can you repay the missed mortgage payments in a lump sum?

  • If not, can you repay it in monthly installments over the next year or so?

  • If not, can you resume paying the same amount you were paying before the pandemic?

  • If yes, you can defer those missed payments to the end of the loan, either by extending the loan by the number of missed months or by making the sum of the missed payments due at the end of the loan. This is called a deferral.

  • If you can’t pay the same amount, you can qualify for a loan modification that will lower your rates by reducing the interest rate and/or extending the length of the loan.

Stark said borrowers planning to exit forbearance, as well as those not in forbearance who have missed payments, need to take the initiative now — before the federal foreclosure moratorium expires June 30 — to contact their mortgage servicers and inquire about their options.

With more than 2 million borrowers still in forbearance and planning to exit, mortgage servicers probably are “bombarded and overwhelmed with the amount of forbearance and post-forbearance options,” Stark said. “There are probably hundreds of thousands coming off forbearance every week.”

Borrowers who are among the 30% whose loans are privately backed and not federally backed should seek help from a housing counselor certified by the U.S. Department of Housing and Urban Development, a local legal aid department, or a private attorney if their servicer refuses to respond or provide affordable options, she said.

Where to find help

Find an adviser through HUD-certified housing counseling agencies. Enter your ZIP code to find one nearest you.

File a complaint about your mortgage servicer with the Consumer Financial Protection Bureau.