My Mortgage Forbearance Ended. Now What?
Oct. 7, 2022
The COVID-19 pandemic affected everyone in one way or another. Whether it meant distancing from friends and loved ones, losing access to childcare or school for your children, or not being able to work, we’ve all had to balance our lives to get through these hard times. For many people who were left without an income stream, this meant concerns about keeping up on bills and especially home mortgages. Thankfully, there were mortgage forbearance options available that allowed families across the country to stay in their homes. However, for many, this COVID forbearance period is coming to an end and borrowers are left with many questions about their repayment options. For help with this, reach out to Hunt Law Firm serving the DeSoto, Texas region and throughout Dallas and Fort Worth.
Understanding Mortgage Forbearance
When the COVID-19 pandemic hit, homeowners across the country were in need of immediate help for avoiding foreclosure. To do this, the federal government implemented a mortgage forbearance program that authorized lenders to approve pauses or reductions in monthly payments on all home mortgages. This forbearance was never automatically issued; rather, borrowers had to work directly with their mortgage servicer to set it up. During this forbearance period, lenders are prohibited from pursuing foreclosure due to non-payment. Forbearance plans are almost always available to borrowers if they can meet certain requirements, but pandemic-related forbearance programs were much easier to qualify for.
My Options Now that Forbearance Has Ended
Your exact options after mortgage forbearance ends will vary depending on your servicer and the type of loan you have, but they can generally be categorized into four groups:
Repayment Plan: With a standard repayment plan, a portion of the amount you deferred will be added onto your regular monthly payments until the past due sum is paid off.
Deferral or Partial Claim: For those who have resumed or can resume making their regular payments, but can’t afford to increase this amount, they can defer in a couple of ways. One option is to tack on the deferred amount on to the end of your loan, thereby increasing the term. For example, if you have 10 years left of a 30-year mortgage, you could add two additional years of payment on to the end of this. Alternatively, you could set up the deferred payments into a subordinate lien that would only be due once your home is sold, paid off, or if you refinance.
Modification: This is a good option for those who are able to start making regular payments again but cannot pay the full amount. These borrowers will have to work with their lenders to reduce their monthly payments and add the deferred amount to the end of the loan.
Reinstatement: The last option is to pay off all the deferred amount in one lump sum, but this is only an option if the borrower requests it—lenders are not allowed to require this of any borrower.
Repayment Options for Various Agencies
The agency that holds your loan will also affect what your repayment options will look like. The majority of conventional mortgages are held by Fannie Mae or Freddie Mac and for these borrowers, you can typically choose from a repayment plan, deferral, or modification. Those with a FHA, HUD, VA, or a USDA loan can get more help pursuing a deferral through a subordinate lien or through modification. These borrowers should contact their lenders directly to see what options are available to them as there are likely more loss mitigation programs they can take part in.
What to Do to Avoid Foreclosure
If you’re nearing the end of your forbearance period and are still concerned about possible foreclosure, there are some considerations to take into mind. One option you may consider is selling your home. This may be a good choice if your income stream has been permanently affected by the pandemic and you don’t think you’ll be able to resume your monthly payments at the pre-COVID rate. Selling will allow you to get out from your mortgage and ideally get into a home with a lower mortgage you can afford.
If selling isn’t feasible, you may want to consider declaring bankruptcy. Speaking with an experienced bankruptcy attorney can help you understand your choices and how bankruptcy will affect you. Importantly, even if you declare bankruptcy, you still may not be able to stay in your home—but this will depend on the specifics of your situation.
Trusted Guidance Every Step of the Way
If you’re in the DeSoto, Texas area and want to speak with an attorney about concerns you have about ending your mortgage forbearance period, contact Hunt Law Firm today. With over 30 years of experience, Attorney Gwendolyn E. Hunt can give you honest and practical legal advice for any financial concerns.