The past year has brought hardships to nearly all families and new challenges for homeowners. The banks have provided long forbearances but these are likely to end soon. The government has currently expanded the moratorium on foreclosures for government-backed mortgages until June. The Consumer Financial Protection Bureau is seeking to prevent foreclosure for the remainder of the year but this is not yet set. https://www.consumerfinance.gov/about-us/newsroom/cfpb-proposes-mortgage-servicing-changes-to-prevent-wave-of-covid-19-foreclosures/. In the interim what are some options available to you?

FORBEARANCE EXTENSION

One of the options still available would be asking for an extension of your forbearance. Your initial forbearance plan will typically last 3 to 6 months. If you need more time to recover financially, you can request an extension. For most loans, your forbearance can be extended up to 12 months. Some loans may be eligible for up to 18 months of forbearance, depending on when your initial forbearance started. Other limitations may apply.

If your mortgage is backed by Fannie Mae or Freddie Mac : You may request up to two additional three-month extensions, for a maximum of 18 months of total forbearance. But to be eligible, you must have been in an active forbearance plan as February 28, 2021.

If your mortgage is backed by HUD/FHA , USDA , or VA : You may request up to two additional three-month extensions, for a maximum of 18 months of total forbearance. But to qualify, you must have requested an initial forbearance plan on or before June 30, 2020. Not all borrowers will qualify for the maximum.

REPAYMENT AND REINSTATEMENT

One option available is repayment of the missed payments and reinstatement of the loan. It’s possible to pay back all the missed payments at once.  If you choose to reinstate your mortgage, you simply pay back all of the payments you have missed at one time. This may not be practical if you have missed a year’s worth of payments. One avenue to reinstatement may be through a repayment plan. The repayment plan would include paying your continual monthly payment along with an additional amount towards the missed payments. This option would need to be approved by your specific lender.

LOAN MODIFICATION

One of the most popular options for most homeowners will be seeking a loan modification. The idea would be to lengthen your loan term and pay off the missed amount at the end of the extended loan term, with additional mortgage payments. This may also result in new and more favorable interest rates. A loan modification allows homeowners to negotiate any of the terms of their loan and to secure terms that are more favorable for them. Unlike forbearance agreements or even deferred payments, loan modifications are more appropriate for homeowners who will deal with financial struggles for a longer period of time. A loan modification is also not a brand new mortgage, as a refinanced mortgage is. See our Loan Modification Blog for specifics as to what you need in order to prepare for a loan modification application.

PAYMENT DEFERRAL

Payment Deferral option lets you pay off the missed amount when the home is sold, refinanced, or at the end of the loan term. A deferral can allow for as many as 12 months of missed payments to be deferred, or postponed, to the end of the term of the mortgage. When homeowners are eligible for a mortgage payment deferral, they typically return to making their regular mortgage payments, and the maturity date, remaining term, and interest rate do not change.