I Chose a Forbearance Plan due to Covid-19 what now?
Many homeowners were offered the opportunity to opt into a mortgage forbearance plan due to the Covid-19 Pandemic. These plans were set up to allow homeowners that were under financial constraints due to the loss of income caused by the pandemic to postpone mortgage payments for several months and even up to a year. These payments were not forgiven, just postponed. Many of these forbearance plans are coming to an end soon and homeowners are finding out that their lenders are looking to them to resolve the unpaid debt.
There were benefits to entering into these forbearance programs for some borrowers. The lender would not charge additional interest during the forbearance, late payments were not being assessed to the borrower and partial payments were accepted at any time during the forbearance. All payments made were applied to the amount owed. It was also acceptable to make no payments during the forbearance period. The other benefit to borrowers was that the lenders would not report missed or late payments to the credit bureaus provided the borrower was current when entering into the forbearance.
So what happens now when the forbearance comes to an end? First, speak with your lender 30 days before the end of the forbearance to see what options they are offering. Some of the options being offered depending upon the lender are to spread the debt over the next twelve months adding it to the monthly payment. If you missed 12 payments that would double the mortgage payment over the next 12 months. Another option might be to refinance the loan. Rates are really low right now and with the longer term and the lower rates, it may keep the payment close to where it was before the forbearance or even possibly lower it! Some lenders are offering the option to tack it on to the back end of the loan, essentially extending the term of the loan. These are some of the options but what happens if I still cannot afford to pay?
If you still cannot afford to pay you may have other options. If you cannot afford to keep your home, your lender may suggest a short sale or deed-in-lieu. These programs are designed to help the borrower exit gracefully from their homes. If you need to go down these routes, you need to speak with your lender about these options. If you are choosing a short-sale make sure that you find a Real Estate Professional who is a Short Sale Specialist to help you market your home and work with your lender to get your short sale approved. Check my page on Troubled Homeowners to read more about short sales