Payment Deferral

Updated 2026-05-17

A payment deferral is a mortgage relief option that allows a borrower to bring a past-due mortgage current by postponing the repayment of certain past-due amounts. These deferred amounts typically include past-due principal and interest payments, as well as other amounts paid by the servicer on the borrower's behalf related to those past-due payments (e.g., taxes or insurance).

Key Characteristics

• Purpose: To cure a mortgage delinquency and bring the loan to a current status.
• Deferred Amounts: Primarily past-due principal and interest. May also include servicer-paid advances for taxes or insurance that were part of the past-due monthly payments.
• Repayment: The total deferred amounts become due at the earliest of:
  • The maturity date of the mortgage.
  • The sale or transfer of the property.
  • The refinance of the mortgage loan.
  • The payoff of the interest-bearing unpaid principal balance.
• Interest on Deferred Amounts: Interest is not charged on the deferred amounts themselves.
• Late Charges: Any late charges associated with the past-due payments are typically waived.
• Impact on Monthly Payment: The regular monthly contractual payment amount does not change as a direct result of the deferral, though it may be adjusted to account for escrow shortages.
• Credit Reporting: Servicers report the status of the mortgage loan to credit bureaus in compliance with applicable laws, such as the Fair Credit Reporting Act (FCRA). For COVID-19 related deferrals under the CARES Act, if the borrower was current before the deferral, they are generally reported as current during the deferral period. Upon completion of the deferral, the borrower is considered current on their mortgage.

Handling of Escrow Shortages

If an Escrow Shortage exists due to the unpaid escrow portion of past-due payments, the borrower may be required to repay this shortage. Common methods include:

• Repaying the shortage over a specified term (e.g., 60 months) by adding a monthly amount to their regular mortgage payment.
• Paying the shortage in full or over a shorter period, if offered by the servicer.

Payment deferrals are a form of loss mitigation and are distinct from Mortgage Servicing or Loan Modification and Rate and Term Refinance. While the specific regulatory authority for such programs may stem from investor guidelines (e.g., Fannie Mae) and general loss mitigation regulations like HUD-1 Settlement Statement, Special Information Booklet, Closing Disclosure, and Form HUD-11702 (12 CFR § 1024.41), the agreement itself defines the terms.