Denver Homeowners Should Prepare for Mortgage Repayment or Seek Assistance from a Debt Settlement Attorney
The COVID-19 global pandemic – still ongoing – has changed peoples’ lives forever. As more Americans than ever face job loss and economic hardship, home mortgage lenders and the federal government began forming responses to their debtors’ needs, partially on their own and partially mandated through the CARES Act.
With parts of the CARES Act slated to end soon, many homeowners are curious about what will happen next, especially if they took the opportunity to enter into forbearance because they temporarily could not pay their monthly mortgage.
What is the CARES Act?
The United States Congress passed the Coronavirus Aid, Relief, and Economic Security Act, which was signed into law by President Donald Trump on March 27, 2020. The CARES Act, in short, is an economic stimulus bill to help Americans with financial problems stemming from the economic fallout of the COVID-19 pandemic and subsequent shutdowns across the United States.
What does the CARES Act say about mortgage forbearance?
The CARES Act specifically addresses mortgage forbearance – pausing mortgage payments for a limited period of time due to financial reasons. The legislation protects people with federally-backed mortgages from foreclosure until at least December 31, 2020, and allows them the right to request a mortgage forbearance for up to 180 days. Federally-backed mortgages include those from the Federal Housing Administration, Veterans Administration, United States Department of Agriculture, the Federal National Mortgage Association (also known as Fannie Mae), and The Federal Home Loan Mortgage Corporation (known as Freddie Mac).
More specifically, lenders and servicers of these federally-backed mortgages are prohibited from beginning a judicial or non-judicial foreclosure against homeowners delinquent on mortgage payments, nor can they finalize an existing foreclosure judgment or sale.
Additionally, homeowners experiencing financial hardship because of the novel coronavirus pandemic can request a forbearance on their loans, plus an additional 180-day extension, so they are not obligated to pay their home loans for up to 360 days. Mortgages in forbearance continue to accrue interest at the normal rate
Independent mortgage companies followed suit by establishing their own relief options, but these are not governed by the CARES Act.
What happens when mortgage forbearance expires?
As of today, the mortgage forbearance protections afforded to homeowners under the CARES Act is set to expire December 31, 2020. For some, this signals a vulnerable start to the new year. Depending on the type of federally-backed mortgage you have, you could expect different things to occur starting January 1, 2021.
Your loan servicer will reach out to you about 30 days before your forbearance plan is set to end to determine whether you qualify for an assistance program.
Mortgage Forbearance and FHA Loans
If you have any FHA home loan and entered forbearance due to a hardship related to the coronavirus, you will not be required to make a lump sum payment for all the monthly mortgage payments you would have paid had you not been in forbearance.
If you were current or less than 30 days delinquent on your FHA loan as of March 1, 2020, you could be entitled to the COVID-19 Standalone Partial Claim. A partial claim is a zero interest, no fee, junior lien on your property that is payable when you sell your home or pay off your mortgage. If you don’t qualify for the partial claim, FHA has other tools to help you repay missed payments over time.
Veterans Affairs Mortgages and Forbearance
Servicers of VA loans cannot require borrowers to make a lump sum payment after exiting a CARES Act forbearance. Instead, the VA offers multiple options to assist military veterans who must repay amounts subject to forbearance. The VA also continues to evaluate options to assist borrowers who were affected by the global pandemic.
USDA Home Loans After Forbearance Ends
The USDA Rural Housing Service does not require a lump sum payment at the end of forbearance. Lenders have been asked to work with borrowers to determine when and how they can make regular payments, in addition to offering a repayment plan or mortgage term extension to defer missed payments to the end of the loan.
Fannie Mae and Freddie Mac Loan Forbearance
If you have a home loan serviced by Fannie Mae or Freddie Mac, you are not required to pay back the amount of suspended loan payments in a lump sum – unless you can.
Borrowers who can afford a larger loan payment may pay extra toward their mortgage for a period of time to make up for payments missed during forbearance. Both Fannie Mae and Freddie Mac will offer payment deferral, which moves your missed mortgage payments to the end of your loan.
Homeowners who have experienced a sustained reduction in income due to the coronavirus may be eligible for a loan modification, which changes the terms of your loan to enable an affordable monthly payment.
Private Mortgage and Loan Forbearance
If your home loan is through a private mortgage lender, refer to their policies and memorandums on loan forbearance and what happens when yours ends.
What if I can’t afford my mortgage payment and don’t qualify for additional relief?
Americans who continue to struggle with their mortgage payments or who find they can no longer afford their homes, through no fault of their own, have options outside of their mortgage companies, to find relief.
If you find yourself struggling to afford your mortgage payment and have accrued other debt as a result of the coronavirus pandemic, there are steps you can take to seek resolution and free yourself.
You are entitled to a free consultation with a debt settlement attorney or bankruptcy attorney in Denver, who will analyze your specific situation and provide honest feedback about the next steps you should take to save your home or get out from under an unpayable mortgage or other debt. Michael and Gailyn Wink, of Wink and Wink, based in Denver and Broomfield, Colorado, are prepared to take a look at your current financial situation and help you out of it.