Can I Refinance a Mortgage on a COVID Forbearance Plan?

Back at the end of the first quarter of 2020, the president might still have wanted to downplay COVID, but many real American homeowners suddenly found themselves in dire financial straits and quickly took advantage of the forbearance plans offered by the servicers of their mortgages.  This payment relief allowed them to navigate the most uncertain and immediate impacts of the pandemic and for some, provided a bridge to re-employment and/or firmer financial footing.  Now that some of these borrowers have made readjustments to the new normal, they may wish to take advantage of the historic low interest rates that have stemmed largely from the Federal Reserve’s response to this same pandemic.  So can a borrower refinance if there has been a forbearance or deferral on the current loan?  Let’s examine the options available today if the borrower has a conforming/conventional loan.  Jumbo loans and government loans (FHA and VA) behave differently and I’ll cover those in a separate post.  But here’s what we need to know today:

  • If you are or were in forbearance with no missed payments, then we must verify that all payments were made to terms of the agreement AND the payoff of the existing loan cannot include any funds due. 
  • If you were in forbearance, had missed payment but brought them current prior to making your refinance application, then we just need verification that your mortgage is current and no funds due to complete any reinstatement are included in the loan’s payoff.
  • If you were in forbearance, had missed payments and brought them current after making your refinance application, then we need verification that your mortgage is now current and we need to source the funds used to bring the loan to that status.
  • If you have a plan for payment deferral then you must provide a copy of the agreement issued by your servicer and you must have made at least 3 consecutive payments following the effective date of the deferral agreement.  The payoff of the loan can, in this case, be used to satisfy the full amount of the mortgage, including the payments deferred.

The low rate environment that exists today is unprecedented, a lot like the adjustments we’re all being required to make as we confront our new reality.  If you’ve taken advantage of the forbearance or deferral agreements available to you, and have adhered to the terms, there’s a good chance you can refinance your conforming or high-balance conforming mortgage today at historic low rates.  You’d be incorrect to assume otherwise.  Get in touch if you think we can help. 

Mask it or casket,

Rob Spinosa
Vice President of Mortgage Lending

Guaranteed Rate
NMLS: 22343 
Cell/Text: 415-367-5959 
rob.spinosa@rate.com

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