Many people have obtained forbearances on their mortgages through the CARES Act and its extension. The current deadline to request a COVID related forebearance is June 30, 2021 for HUD/FHA, USDA or VA loans. You can qualify for up to 18 months of forbearance, but at some point the bill becomes due. For many people who got the first round of forbearance that time is coming soon!
Who Can Have a Forbearance under CARES
The CARES Act, by its terms, applies only to Fannie Mae, Freddie Mac or other federally backed loans. If your loan is federally backed, you can have up to an 18 month forbearance. If you have a conventional or private loan, your options will depend on the lender. The forbearance suspends payments. You don’t accrue interest, fees or penalties while in forbearance. It is a pause, but eventually payments will have to restart.
What do I do when my forbearance ends?
This will depend on your lender. According to the CPFB, federally backed lenders cannot demand a lump sum repayment. They can defer the payment to the end of the loan by either extending the term or by creating a subordinate loan that places the payment at the end of the mortgage. You can also see if the lender will modify the mortgage or add an additional amount to the monthly payment to make up the difference over time.
If you have a private or non-government backed loan, your lender can require that you repay in a lump sum unless you have state-specific issues that prevent that. In that case, you may have a very serious problem. Failure to bring the loan current when forbearance ends is a default and could lead to a foreclosure action being commenced.
What if I was behind on payments before COVID hit?
The CARES forbearance does not cure pre-COVID arrears. If your lender is willing to modify the loan, that could clear up the entire thing though! If your mortgage was significantly behind, you may still have problems.
What Can Be Done If the Lender Won’t Play Nice?
If your lender is not offering you a fix you can afford, you have a serious problem. In such cases, the only way out may end up being a Chapter 13 Bankruptcy. Cases under this Chapter require a payment plan to cure arrears and can incorporate loan modification. This can fix not just the mortgage issues but also clean up any other debt that you have accrued, giving you a fresh start. Our office handles matters like this every day. You can CONTACT us to discuss the matter or look at the other materials we have posted on our website or our youtube channel. You can fix it!