MORTGAGE FORBEARANCE ALERT! Don’t Be Caught Facing Foreclosure. You Have Options!
MORTGAGE FORBEARANCE ALERT! Some homeowners will soon come to the end of their 18-month mortgage forbearance period. As a result, borrowers affected by the pandemic will have to figure out how to repay their back payments. Fortunately, most loan servicers don’t want to foreclose. Believe it or not, lenders don’t want to foreclose. Therefore, they are offering several repayment options than can help keep borrowers in their homes.
MORTGAGE FORBEARANCE ALERT! Who qualifies?
Freddie Mac or Fannie Mae temporarily suspended payments for up to 18 months for some homeowners. Congress specified no deadline for applying for coronavirus-related forbearance from either of the two mortgage giants. However, the Federal Housing Finance Agency has set a September 30, 2021, deadline. If your loan is insured by the Federal Housing Administration (FHA), part of the U.S. Department of Housing and Urban Development; the Department of Agriculture; or the Department of Veterans Affairs (VA), the deadline for requesting an initial forbearance is also Sept. 30.
Your first step should always be to contact your loan servicer. You can check online to see if Freddie Mac or Fannie Mae owns your mortgage:
MORTGAGE FORBEARANCE ALERT! Remember, it’s not loan forgiveness; it’s loan forbearance. A forbearance is when you and the servicer agree to temporarily reduce or suspend mortgage payments. In return, the servicer agrees not to foreclose during that time. However, you will still owe principal and interest on the payments you missed.
If your loan isn’t owned or serviced by the federal government, ask your servicer about forbearance offers. In any event, if you’re having difficulty making payments because of the pandemic contact your servicer as soon as possible.
About 1.6 million mortgages are in pandemic-related forbearance.
MORTGAGE FORBEARANCE ALERT! What happens next?
Mortgage servicers would like you hand them a check for the missing payments when the forbearance period ends. This is unusual and servicers know that it is unlikely.
Typically, servicers offer a variety of repayment options, based on your ability to pay. They are in the business of servicing loans, not managing foreclosed real estate, and usually want to work with you. Here are the common options a lender may offer:
- Repayment plan The servicer will ask if you can repay the amount you missed in forbearance in three to 12 months.
- Back-end payment The servicer will ask if you can continue to make your mortgage payment as before. This means the servicer will tack on payments to the end of your loan.
- Extended payments If you can make payments as you did before the pandemic started, the lender may offer to extend your mortgage. This adds additional interest and a longer payoff period. However it will be a back-end payment. You could also refinance your loan or repay the balance when you sell the home.
A fourth option would be for the lender to offer a new mortgage with a 40-year term. This would reduce the amount of your monthly payments. However, it could stretch the length of your mortgage from 30 years to 40 years. A 40-year mortgage would increase the amount of interest you pay over the term of the loan.
If none of these solutions work when the forbearance period ends, you’ll probably have to sell your residence. However, the strong housing market has given home values a lift.
If you are upside-down on your home, you may be able to do a deed in lieu of foreclosure. This is where you can return the house to the servicer to satisfy the debt. Typically, the servicer will require that the house be in good condition and broom-swept clean. Lenders may offer some type of cash-for-keys deal.