When Mortgage Forbearance Ends: Know Your Options

When Mortgage Forbearance Ends: Know Your Options

 When Mortgage Forbearance Ends: Know Your Options

Last year, a $2 trillion stimulus bill called the CARES (Coronavirus Aid, Relief, and Economic Security) Act was enacted to soften the impact of an economic downturn set in motion by the coronavirus pandemic. Since then, more than nine million Americans have pushed the pause button on their monthly mortgage payments and entered into what is technically referred to as forbearance.

Under the CARES Act, homeowners with conventional, FHA, VA, or USDA loans could request an initial home loan forbearance for up to six months. They could also request a six-month extension for up to one year of total forbearance. “Forbearance plans are based on when you requested them,” explains David Shapiro, president, and CEO of EquiFi Corporation. That means homeowners who entered forbearance plans early in the coronavirus pandemic are likely nearing their forbearance end dates. 

Anticipating a wave of pandemic-fueled foreclosures, the Consumer Financial Protection Bureau has issued new rules to ensure borrowers have time to explore their options, including loan modifications and selling their homes. The rules cover loans on an owner’s primary home and will go into effect on Aug. 31, a month after a federal moratorium on foreclosures is set to expire.

About 2 million people are currently under forbearance plans, with at least 900,000 homeowners projected to exit forbearance between now and the end of the year, according to the CFPB.

Concerns over foreclosure increases have been “wildly overestimated.”

As forbearance periods come to an end and homeowners resume making their mortgage payments, one mortgage and foreclosure expert said concerns over foreclosure increases have been “wildly overestimated.” Once homeowners exit their forbearance periods, they have several options available to them to resume payments on their mortgage loan.

A new servicing rule from the Consumer Financial Protection Bureau (CFPB) stipulates that mortgage servicers can move all missed payments to the end of a loan term, and may not modify the loan in a way that increases monthly payments. 

“An unchecked wave of foreclosures would … risk destabilizing the housing market for all consumers,” said Dave Uejio, the CFPB’s acting director. We are giving homeowners the time and opportunity to make informed decisions about the best course of action for them and their families” said Uejio. The new rules include safeguards like requiring mortgage servicers to increase their outreach to borrowers before beginning a foreclosure. 

When Mortgage Forbearance Ends: Know Your Options

Mortgage forbearance is not the same as mortgage forgiveness. After your forbearance period ends, you’ll have to make arrangements with your loan servicer to repay any amount suspended or paused. Forbearance repayment can look very different depending on your lender. Borrowers will typically have several options for repayment once forbearance expires:

  1. Make a full repayment. This is a one-time lump sum payment. Lenders are not allowed to require this and if you’re unable to pay one lump sum, there are other options available.  
  2. Make intermittent payments. Borrowers can repay the missed amount over 3-12 months on top of their regular monthly mortgage payments.
  3. Lengthen the loan term. Pay off the missed amount at the end of the extended loan term by additional mortgage payments.
  4. Request payment deferral. This allows borrowers to pay off the missed amount when the home is sold or refinanced, or at the end of the loan term.
  5. Pursue a loan modification. This helps borrowers who are at risk of default change their mortgage terms, usually including a lower interest rate, reduced length of the loan, or reduced monthly payment. 

Just as your eligibility for debt forbearance may differ between different lenders, so might the options available for repayment of those deferred payment agreements. The most important thing is that you ask your lender about the options available to you, and make sure you get the final agreement in writing. Ultimately, the right option for you depends on your current finances, employment status, and ability to resume mortgage payments.

Will the housing market be affected by foreclosures?

Homeowners are currently at an advantage, partly due to historically low-interest rates, resulting in competition and high demand driving home prices higher. “Demographics (millennials reaching prime homebuying age in very large numbers), low-interest rates, and pandemic-driven trends (migration from urban renter to suburban homeowner) will continue to drive demand,” RealtyTrac Executive Vice President Rick Sharga said.

” While some borrowers will not be able to recover from the financial distress COVID inflicted on them and will face the choice of selling their home or losing it to foreclosure, there won’t be enough of those properties to fix the supply/demand imbalance in the market, and they shouldn’t need to be sold at so much of a discount that they’ll impact prices in any given market,” said Rick Sharga.

Additional actions to prevent foreclosures  

On July 23, the White House released a fact sheet explaining how homeowners with government-backed mortgages will be given further options to enable them to keep their homes when exiting forbearance. These actions were taken by three federal agencies that back mortgages including the Department of Housing and Urban Development (HUD), the Department of Veterans Affairs (VA), and the US Department of Agriculture (USDA). The Federal Housing Finance Agency (FHFA) provided similar relief for mortgages backed by Fannie Mae and Freddie Mac. Here are two examples mentioned in the release:

  • “For homeowners who can resume their pre-pandemic monthly mortgage payment and where agencies have the authority, agencies will continue requiring mortgage servicers to offer options that allow borrowers to move missed payments to the end of the mortgage at no additional cost to the borrower.”
  • “The new steps the Department of Housing and Urban Development (HUD), Department of Agriculture (USDA), and Department of Veterans Affairs (VA) are announcing will aim to provide homeowners with a roughly 25% reduction in borrowers’ monthly principal and interest (P&I) payments to ensure they can afford to remain in their homes and build equity long-term. This brings options for homeowners with mortgages backed by HUD, USDA, and VA closer in alignment with options for homeowners with mortgages backed by Fannie Mae and Freddie Mac.”

For non-federally backed loans

Check with your loan servicer for the forbearance repayment options that they offer. You may be able to find information about forbearance programs by checking the websites of your lender and servicer for more detailed information. Be sure to inquire about what limitations, options, and fees may apply to the repayment of your loan due to the fact that it is not federally backed.

Takeaway

Ultimately, your best next steps depend on whether you plan to sell your home or adjust your finances to pay an adjusted mortgage after your forbearance period ends. Familiarize yourself with your options so you’ll know what to request. If you are concerned about losing your home, contact a HUD-approved housing counseling agency. They can help you figure out your options and guide you through the paperwork and process of working with your loan servicer. Find a housing counselor near you. Remember, help is free. You don’t have to pay anyone to help you avoid foreclosure.

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Tom Gilliam, REALTOR®
RE/MAX Classic
29630 Orchard Lake Rd.
Farmington Hills 48334
Direct: 248-790-5594
Office: 248-737-6800
Email: Homes2MoveYou.com
License #314578 

Sources: 

https://www.whitehouse.gov/briefing-room/statements-releases/2021/07/23/fact-sheet-biden-administration-announces-additional-actions-to-prevent-foreclosures/
https://themortgagereports.com/69687/cares-act-mortgage-forbearance-ending-what-to-do  
https://myhome.freddiemac.com/blog/homeownership/20200629_understanding_covid-19_forbearance_part_II.page

An Uptick in Mortgage Forbearances For The First Time in 3 Weeks

An Uptick in Mortgage Forbearances For The First Time in 3 Weeks

An Uptick in Mortgage Forbearances For The First Time in 3 Weeks – According to Black Knight, the latest data from their McDash Flash Forbearance Tracker indicated that the number of homeowners currently in forbearance plans increased this week after seeing three consecutive weeks of declines. In the past week, the number of active forbearance plans rose by 79,000, canceling out roughly half of the improvement seen since the peak on May 22.

As of Tuesday, 4.68 million homeowners were in forbearance plans, allowing them to delay their mortgage payments for at least three months. This represents 8.8% of all active mortgages, up from 8.7% last week. In the previous week, the number of borrowers in forbearance plans fell by 57,000. Forbearance plan increases were seen every day for the past five business days stated the report.

When entering forbearance, your mortgage payments are suspended until the end of the forbearance period. Those payments can be remitted either in repayment plans, loan modifications, or when the home is sold or the mortgage refinanced. The CARES Act, which was signed into law in March, allows borrowers to miss monthly payments for at least three months and potentially up to a year.

Mortgage bailout numbers were expected to improve as the economy reopened and with the slowing of job losses. However, the uptick in recent mortgage forbearance plans shows that homeowners are still struggling as COVID-19 cases continue to increase in several states.

Active Forbearance Plans

According to the report by Black Knight, 6.9% of mortgages backed by Fannie Mae and Freddie Mac are in forbearance, up from 6.8% last week. That’s a total of 1.93 million mortgages with $405 billion in unpaid principal. Although the numbers rose across all types of loans, they were sharpest for FHA/VA loans.  

FHA offers low down payment loans to borrowers with lower credit scores are particularly popular among first-time homebuyers. The number of forbearances for FHA backed home loans was 14.7%, up from 14.3%. The share of forbearances of VA loans was 7.5%, up from 7.3%. Together, FHA and VA loans represent $258 billion of unpaid principal, said Black Night.  

The number of private-market mortgages in forbearance was 9.6%. That’s a total of 1.5 million private-market mortgages in forbearance, up from 9.5% the previous week according to the report. Private-market mortgages are not backed by a government agency or a GSE (privately owned, but receive support from the Federal Government). The unpaid principal balance for those mortgages is $361 billion.

At today’s level, mortgage lenders may need to advance up to $3.5 billion/month to holders of government-backed mortgage securities on COVID-19-related forbearances. That’s in addition to the $1.4 billion in T&I payments (the balance in an escrow account used to pay for property taxes and insurance) they must make on behalf of borrowers.

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Tom Gilliam, REALTOR®
RE/MAX Classic
29630 Orchard Lake Rd.
Farmington Hills 48334
Call: 248-790-5594
Office: 248-737-6800
Email: Tom @ Homes2MoveYou.com
License #314578

 Article Sources:

Fannie Mae & Freddie Mac Offering Help to Homeowners During COVID-19 Crisis

Fannie Mae & Freddie Mac Offering Help to Homeowners During COVID-19 Crisis

Fannie Mae & Freddie Mac are extending help to millions of homeowners facing financial hardships as a result of COVID-19. 

Both Fannie Mae and Freddie Mac help stabilize mortgage markets and protect housing during extraordinary periods when stress or turmoil in the broader financial system threaten the economy such as the current COVID-19 pandemic.

Nearly half of the nation’s mortgages are owned or backed by Fannie Mae or Freddie Mac.

The swift wave of unemployment and financial hardships from furloughs, reduced wages, and commission cuts have left many homeowners worried about how they will make their mortgage payments in the coming months, but relief options are available.

If you are unable to make your mortgage payment, it’s important to call your lender as soon as possible. That said, reaching your lender can take some time because financial institutions are being bombarded with so many calls.

The Consumer Financial Protection Bureau provided guidance on what to do if you can’t pay your mortgage and what options are available as part of the Cares Act signed in law on March 27.

The CARES Act puts in place two protections for homeowners with federally backed mortgages:

  • A foreclosure moratorium
  • A right to forbearance for homeowners who are experiencing financial hardship due to the COVID-19 emergency

Both Fannie Mae & Freddie Mac are offering help to homeowners to get through this crisis without losing their homes. If you don’t have a federally backed mortgage, you still may have relief options through your mortgage servicer or from your state. 

To look up whether or not your mortgage is owned or backed by Fannie Mae or Freddie Mac, you can click these links:

Fannie Mae  

Fannie Mae said it will suspend foreclosure sales and evictions of borrowers for 60 days, according to the company statement. In addition, homeowners are eligible for a forbearance plan to reduce or suspend their mortgage payments for up to 12 months.

If Fannie Mae owns your mortgage loan, their Disaster Response Network™ (DRN) can help you navigate the mortgage relief process and address other financial challenges.

You can visit KnowYourOptions.com to learn about available mortgage assistance and relief options from Fannie Mae.

Freddie Mac

Freddie Mac is also taking action to help make sure homeowners with Freddie Mac-owned mortgages who are directly or indirectly impacted by COVID–19 are able to stay in their homes during this challenging time.

Freddie Mac is offering options like mortgage forbearance for up to 12 months, waiving of assessments of penalties and late fees, halting foreclosure actions and evictions of borrowers living in Freddie Mac-owned homes until at least May 17, 2020, and loan modification options that lower payments or keep payments the same after the forbearance period. 

You can learn more about Freddie Mac’s mortgage relief options to help homeowners by visiting My Home by Freddie Mac®.  

Borrowers who may be experiencing financial challenges due to COVID-19 are strongly encouraged to contact their mortgage servicer (the company listed on your monthly statement) so they can explore Fannie Mae and Freddie Mac’s workout options.

To be eligible for protections under the CARES Act, your mortgage must be federally owned or otherwise backed by one of the federal agencies and entities listed below:

Additional Mortgage Relief Options

Many states are implementing or considering various mortgage relief options, including the suspension of foreclosures, as well as additional assistance for homeowners. Check your state’s government website for details.

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Tom Gilliam, REALTOR®
RE/MAX Classic
29630 Orchard Lake Rd.
Farmington Hills 48334
Call: 248-790-5594
Office: 248-737-6800
Email: Tom @ Homes2MoveYou.com
License #301741

 

 

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