Back in 2020, homeowners whose income was affected by the pandemic were given the opportunity to apply for a forbearance on their mortgage payments. According to a report from the Joint Center for Housing Studies of Harvard University, Black Knight reported that 14% of all mortgage holders filed for a forbearance during the pandemic. By March 2021, 68% of them had already exited the program either by resolving the delinquency or paying off their loans. Eight percent were still working some sort of loss mitigation agreement and 4% were still in delinquency in the first quarter of 2021. They also reported that about 22% of mortgage holders still in forbearance by the time the 18 months are up, have 10% or less equity and more likely will not have enough equity to sell with equity. (jchs.harvard.edu)
Recently, it was announced that the foreclosure moratorium would end July 2021. So, what if you are one of those mortgage holders who is in forbearance and at risk of foreclosure? What is next?
The Consumer Financial Protection Bureau (CFBP) has implemented protections for you that will take effect on August 31, 2021.
- Servicers will need to give you time to process your options and consider your situation. They must meet certain steps before they can initiate a foreclosure.
- Servicers can offer streamlined loan modifications, which cannot increase your payment.
- Servicers will be required to increase their outreach to borrowers before they can initiate foreclosure.
What are your options:
- Resume regular mortgage payment. You can ask to defer your missed payments by moving them to the end of the mortgage.
- Lower monthly mortgage payment. Ask to modify your loan. This can be changing the interest rate, principal balance or the term of the loan.
- Sell your home. If you find yourself not being able to make your mortgage payments and have enough equity, you may be able to sell with some profit. If you find you do not have enough equity, you may apply for a short sale. Foreclosure should be the last thing to consider if you do not have enough equity.
A servicer can initiate foreclosure if you:
- Abandon the property;
- Were more than 120 days behind in your mortgage before March 1, 2020;
- Are more than 120 days behind on your mortgage payment and have not responded to specific required outreach for more than 90 days; or
- Have evaluated all options other than foreclosure and there is no other options available. (consumerfinance.gov)
Feel free to contact me if you are currently in forbearance and need guidance on exiting the program, or believe you will need to sell your home. I am here to help. I’ll be happy to guide you through the process.