Homeowners have endured a whirlwind of emotions over the past 12 months. From the lows felt when the virus first took hold to the temporary relief when the CARES Act was passed, one constant through it all has been a sense of uncertainty. Luckily, homeowners struggling to pay their mortgage each month have a source of support—but as of January 31, 2021, that assistance may no longer be an option.
What Happens on January 31?
On January 31, 2021, mortgage lenders can begin to initiate foreclosure proceedings on defaulted loans. Currently, there is a moratorium on single-family foreclosures, which was extended on 12/2/2020. So, no matter how many payments you may have missed recently, your lender was unable to initiate a foreclosure. That all changes on January 31.
An important exception to note is that if you had a foreclosure in process on April 3, 2020, your foreclosure might proceed at any time—so do not wait to take action.
What Does This Mean for Me?
You must act quickly to avoid a foreclosure if you have missed multiple payments. If your lender is unwilling to extend the forbearance, arrangements need to be made to bring payments current quickly.
What Is a Mortgage Forbearance Plan?
A forbearance agreement is between a borrower and a loan servicer that suspends or reduces mortgage payments for a period of time. One of the critical benefits of forbearance for a homeowner is that the loan servicer cannot initiate a foreclosure during this time.
While homeowners receive relief from their monthly mortgage payment, the relief is only temporary, and the payments must still be paid in full. Speak with your mortgage provider for the specific details of your forbearance agreement.
Key points to remember with a forbearance:
- The total amount you owe does not decrease
- Interest continues to accrue on skipped payments
- The forbearance period is temporary
Differences in Forbearance Rules
The terms of your forbearance agreement can vary depending on the type of mortgage you have and who your lender is. Some of the variables can include:
- How long the forbearance period lasts
- What, if anything, is due during the forbearance period
- How the skipped or lowered payments will be repaid once the forbearance period ends
Once the forbearance period ends, the lender is expecting payment to begin as agreed. If you are still facing financial hardship when the forbearance period ends, your lender may offer you a modification agreement. If a modification is declined, the lender is then able to begin foreclosure proceedings. An avenue to avoid a foreclosure is to consider selling your home.
Short Sale or Quick sale
If selling your home becomes the best option to avoid foreclosure and the lingering impacts, a short sale (home is valued at less than is owed) or a quick sale (there is equity in the home however it needs to be sold quickly) are options to consider.
In both cases, these sales require special expertise to be handled properly and quickly. Contact us for a confidential conversation to learn more about available options before it is too late. We have specialized in sales like these since 2008.