Because of all the unemployment right now an estimated 4.1 million Americans have explored forbearance for their mortgage. Many experts perceive more homeowners will seek this protection unless the pandemic and current issues start to normalize. So what is forbearance?
Forbearance is the act of “pausing” your mortgage payments.
This is a basic economic rescue package for the economy and for homeowners. It acts as a cushion or breather for homeowners to get back on their feet. But is a mortgage forbearance a good idea? Here’s what you should know about mortgage forbearance.
You need to know which company services your loan and which company owns it, which may be different. The servicer is the organization you make your payment to and get your statements from. You can look up your mortgage servicer by searching the Mortgage Electronic Registration Systems website or simply look on your statements. Who owns the loan pays a role in what relief options are available to you.
70% of all mortgages are federally backed, which includes loans such as USDA, VA, and FHA. The remainder has mortgages held by private investors or banks.
The forbearance is not a mortgage modification or mediation but allows homeowners to suspend their mortgage payments for a certain period of time. The payments are not forgiven and they must be repaid later but each servicer has different options for their borrowers. They may pause the payments altogether or offer a reduced payment during this time instead. People who have federally backed mortgages that may be facing financial hardship due to the pandemic are typically given the right to forbearance for up to one year. Borrowers can request a 180-day forbearance that can be renewed and many borrowers are doing just that or at least going the 90 days with the option of extending it if necessary.
There are no additional fees, interest, or penalties that is tacked onto the account, which makes it a great option for many homeowners. Those with privately-held loans, however, don’t have the same options. They may have different relief and repayment options so it’s important to go directly to your servicer or owner or both if necessary.
It’s important to understand who is responsible for payments that might typically go into an escrow account such as homeowner’s insurance and property taxes, often included in the mortgage payment. If they are not covered by the servicer, the homeowner should continue those payments if possible.
Homeowners with federally backed loans don’t have to pay back the missed payments all at once but can be spread out over time, tacked them on to the end of the loan, or make a lump sum payment at the end of their mortgage. Borrowers that go into forbearance and return to making normal monthly mortgage payments can opt to repay those missed payments when the home is sold or refinanced.
Homeowners with privately-held loans must negotiate the best available option with their servicer, which may include extended payments or repayments over time. Make sure you understand the logistics and the rules around forbearance so that you’re not stuck with a balloon payment that you can’t afford.
Forbearance may hurt your credit score, however, the credit of homeowners who sought protection because of the pandemic is not affected. This is definitely a better option than simply not paying altogether. It comes down to communication and negotiation. Simply not paying could lead to foreclosure and severe damage to your credits.
Feel free to contact our office at any time for more answers to your forbearance questions, mortgage modification, or through a counselor with the Department of Housing and Urban Development. Most of these counselors are free of charge and you can always file a complaint about your servicer should they not offer any type of options.
In a Media Release on April 3rd 2020 the Consumer Financial Protection Bureau released a video on How the mortgage forbearance works under the cares act.
Due to the Covid-19 Outbreak many mortgage lenders are offering Forbearance assistance. Forbearance means your mortgage lender or bank may be willing to pause or reduce mortgage payments for a limited period of time. It does not eliminate your payment or erase what you owe on your mortgage. With a mortgage forbearance missed or reduced payments must be repaid at a future date.
It is recommended that if you are able to make or keep up with your mortgage payments, do so. A forbearance only delays the payments to a future time when you’ll have to make them up on top of your normal mortgage payments.
Here is the video regarding How Mortgage Forbearance Works Under The Cares Act that was released by the Consumer Financial Protection Bureau or CFPB.
For information or questions regarding legal assistance for your home mortgage, mortgage mediation, mortgage modification or bankruptcy in Washington State including King, Snohomish and Pierce counties and the cities of Bellevue, Seattle, Everett, Tacoma, Olympia and Western Washington:
Contact Advantage Legal Group in Bellevue at 425-452-9797
While some of us still might be getting a paycheck others of us may not and with your mortgage payment looming that can be extremely stressful. With the outbreak of coronavirus, homeowners may find themselves in challenging situations unable to make their mortgage payments. 7 out of 10 Americans live paycheck to paycheck and have less than $1000 in the bank. This can bring on stressful times for those of us that still need to make our mortgage payment. So what kind of homeowner relief from COVID-19 is available?
According to Fannie Mae, if Fannie Mae owns your loan, their Disaster Response Network can help navigate the mortgage relief process and offer other solutions to financial challenges. If you need mortgage help, Fannie Mae is available.
If the coronavirus has caused you to lose your job or income there are options. Homeowners may be eligible for forbearance plans to reduce or suspend their mortgage payments for up to 12 months.
Homeowners will not incur late fees during this time.
The credit bureau reporting of past-due payments of borrowers that are currently in a forbearance plan is suspended as well.
After the forbearance, a servicer must work with the borrower/homeowner on a permanent workout option to help maintain or reduce monthly payment amounts as necessary. This might include a loan modification.
Foreclosure sales and evictions of borrowers are suspended for 60 days.
While we don’t think that this outbreak and quarantine will last for 12 months, it is important to act quickly. If you have a Fannie Mae loan and are unable to make your mortgage payments, you can contact their Disaster Response Network for assistance. Their HUD-approved housing counselor can assist you in your needs and come up with a personalized action plan.
If your mortgages to Freddie Mac, similar forbearance assistance may also be available.
Because new mortgage rules with the coronavirus can change daily, it’s crucial that homeowners communicate with their lender about the latest options available to them. What might not have been available last week could be available today. The important thing is to keep you in your home, prevent or avoid foreclosure, and develop a plan for the next year ahead.
Should I Hire a Lawyer for a Mortgage Mediation or Foreclosure? – If your lender has failed to approve previous effort to modify your loan, often mediation is the best way to go. What is mediation? Foreclosure mediation is a meeting where a homeowner and mortgage lender negotiate potential modifications or other alternatives before an impartial Judge in an attempt to reach an agreement. And this kind of mediation requires the expertise of a lawyer.
Related: What to Expect in a Bank-Owned Home
Why hire a lawyer? The most common question asked when someone is facing foreclosure is, “What will give me the best chance to avoid this?” Although circumstances involved always vary greatly, the answer ALWAYS remains the same. And that answer is this, ” to fully and most completely use all your rights and remedies including foreclosure defense, loan modification, mortgage mediation, and bankruptcy, you MUST be represented by a foreclosure lawyer…an EXPERT foreclosure lawyer.”
Beware of scams and make sure your lawyer is an expert. Anyone who generally guarantees they’ll save your home is either a scam artist or ignorant or both. Additionally, the person at the bank may be a brand new hire who knows nothing or someone who actually knows what they’re talking about. Either way, the next time you call, you may get the new hire. You want an expert, the same expert, and throughout the whole process.
An expert can help you understand the debt and tax consequences of a short sale, protect you from pitfalls and scams, assure you that, should foreclosure happen, you have the right to stay in your home for as long as your rights and remedies allow and enable you to plan where you’ll live next without fear of the sheriff showing up and ordering you to leave. An expert lawyer can also, in most cases, help you to be debt-free when you leave should foreclosure be inevitable in your case. And of course, an expert lawyer can help you come to an agreement with your lender that avoids foreclosure altogether.
Yes, these kinds of lawyers can be expensive but hiring an expert almost always benefits you not only financially but emotionally. The benefit of avoiding the loss of your home is obvious. But should you lose your home, remember, as mentioned before, there are pitfalls and scams to avoid and knowledge to be learned about debt and taxes that come with certain mediation agreements.
To contact an expert representative today, visit Advantage Legal Group.
If you’re looking to alter your mortgage payment or you need some form of a loan modification, you’re probably wondering what it is, how it can help, and what this means for your credit and your finances moving forward. One of the common questions I get is will a loan modification lower your payments?
A loan modification is a modification or a change to the original terms of your mortgage. If you’ve had a financial hardship or if you have a high risk of losing your home based on medical bills, job loss, or financial change, your lender may allow you to modify your existing mortgage. The goal is to reduce the monthly payment for a time or permanently in order to keep you in the home until things get better.
There are several different directions for loan modifications.
Principal reduction – This is where your lender will eliminate a portion of the debt allowing you to repay less than you originally borrowed. Your lender will recalculate monthly payments based on a decreased balance. Most lenders are very reluctant to do this so you’re likely to have them alter other features of the loan instead of lowering your principal amount.
Lower interest rate – Your lender may reduce your current interest rate. This can also reduce your monthly mortgage payments and save you money over time. Sometimes these rates are temporary or they can be negotiated to be permanent for the life of the loan or Intel the borrower refinances or sells the property.
Extended terms – This is where your lender will extend how many years you have to pay the loan back. This will lower your monthly interest rate but it will be more costly over time since you be paying more in interest. This option is also referred to as a re-amortization.
Fixed-rate – Your lender may switch you from an adjustable-rate mortgage to a fixed-rate loan in order to keep you in the home and keep the monthly payments the same rather than going up or down based on the interest rates.
Postpone payments – Your lender may allow you to skip a few payments, which is a good temporary solution if you have a job change, job loss, or you have medical expenses that need to be paid first.
What happens if your lender refuses to talk to you about a loan modification? Contact our office today. We handle a lot of different cases with mortgage modification and loan modifications to keep you in your home and keep your payments low.