If you received financial relief through the federal government’s Covid mortgage forbearance program and it hasn’t already ended for you, it will soon. The CARES Act provided a mortgage payment forbearance option for all borrowers who, either directly or indirectly, suffer a financial hardship due to the coronavirus (COVID-19) national emergency. A forbearance is a temporary postponement or reduction of mortgage payments. It is not payment forgiveness. You must decide what happens next. That could be paying back what you owe, modifying your mortgage, selling the house, or filing for bankruptcy. It depends on your goals and financial status.
When Does Covid Mortgage Forbearance End?
About 1.6 million homeowners are in some stage of forbearance, according to Forbes. To qualify, you couldn’t pay your mortgage. The program allowed you to stay in your home, but the forbearance period is generally 12 to 18 months, reports Fox Business.
Covid Deferral Mortgage Options
The servicer must follow the rules before starting a foreclosure.
Assuming you don’t want to sell your house and move, preventing foreclosure to retain your home is probably your top priority. Depending on your finances, you may be able to extend the forbearance period. If that’s not an option and foreclosure may be a possibility, the federal Consumer Financial Protection Bureau issued a rule mandating that loan servicers must take these steps before starting the process:
- Review a loss mitigation application that you submit. It shows your financial and household information.
- Verify that your home is abandoned.
- Take diligent efforts to reach you before going forward with a foreclosure. It’s permitted if you’re at least four months behind in payments and have been unreachable for more than 90 days.
If the servicer follows these rules, a foreclosure can go forward. As you can see, it’s essential to keep in touch with the servicer in order to stay in your home.
Loan Modification After Covid Forbearance May Keep You in Your Home
Making additional payments over a longer timeframe may make up for missed payments.
When forbearance ends, you must make Covid-deferred mortgage payments one way or another. You can do so with a lump sum if you have the money, but it’s not required. Otherwise, the repayment options vary by the loan type. Under the federal CARES Act, the loan servicer can demand that you repay what you missed in one of the following ways:
- Repay past due payments within six to 12 months after the forbearance period ends (six months for federally backed mortgages, 12 for Fannie Mae or Freddie Mac loans)
- Extend the mortgage term (the time it covers) and add excused payments onto the loan, increasing the number of payments
- Extend the mortgage term to 30 years (40 for Fannie Mae and Freddie Mac mortgages) and the monthly payment would be the same as or less than the amount it was prior to forbearance.
You can file a Chapter 13 repayment plan to cure the missed payments and protect your home
Chapter 13 is a consumer debt reorganization that enables debtors to repay financial obligations affordably and in one monthly payment over a three- to five-year period. Chapter 13 is an option that is available to help take the control back from your creditors and stop a foreclosure. One of the most significant benefits of filing for Chapter 13 Bankruptcy is that it gives you the ability to keep your home. If you have missed payments and are at risk for foreclosure, Chapter 13 gives you a chance to “catch up” and stop a foreclosure to keep your home.
If You Sell Your House, You May Avoid Covid-Deferment Mortgage Payments
It’s a good time to sell and a tough time to buy, but it’s worth considering.
If you no longer want to live in your house, or can no longer afford it despite these programs, it may be a good time to sell. If you can sell it for more than what you owe on the mortgage (plus the costs of selling), you can keep what’s left.
If not, you may want to pursue a short sale. This is when the house sells for less than your mortgage debt, but the mortgage holder agrees not to seek payment for the rest or just a portion of what you owe. You may also be able to give your creditor the house’s deed in exchange for no longer being responsible for what you owe.
The upside of selling is, generally, we have a strong real estate market. Columbus, for example, saw an increase of 14 percent in housing prices comparing September 2020 to September of this year, according to Rocket Homes. The downside is it makes buying another home less affordable (rents have generally gone up, too). If you downsize and move to an area with lower taxes or one without homeowner association fees, you might still be able to buy another home.
A Refinance May Be Better Than a Loan Modification After Covid Forbearance
If you qualify, the extra costs may be worth it if you’re in your home for a long time.
Refinancing may or may not be a good option. There can be limitations on the ability to refinance based on your loan status or the type of loan. If you have poor credit, you may not qualify, or the interest rate may be higher than you’d like. There are also costs to refinance, so it may not make sense if you’re not planning on remaining in your house for long. Depending on your situation, bankruptcy might be your best choice. It may allow you to lessen or eliminate other debts, so you can better afford mortgage payments and keep your home.
Contact Us for Support and Guidance When Mortgage Payments Become an Issue
Your financial problems are unique, so the skilled Ohio debt-relief lawyers at Fesenmyer Cousino Weinzimmer will advise you about possible solutions that are right for you. During your free consultation, we will evaluate your finances, tell you about your options, and help you decide on the right path to a better future.
Delay may only make your situation worse, so call the Ohio foreclosure attorneys at Fesenmyer Cousino Weinzimmer today! Call one of our branches at 614-228-4435 (Columbus), 937-222-7472 (Dayton), or 877-654-5297 (Cincinnati) or email for your free consultation so we can talk about the debt relief solutions that will work best for you.
