Millions of American homeowners are troubled right now. Why? It’s because their mortgage forbearance is about to expire. And with the rate this pandemic is going, they still don’t have the means to pay their plans in full. Many are still unemployed. Many businesses still have not gone back to their entire operations.
According to the Federal Reserve Bank of New York, there are 9.3 million mortgages under forbearance programs. In June 2021, it has been reduced to less than 2 million. The problem is that 39% of those mortgages still in forbearance are under borrowers with credit scores under 620. Credit score 620 is the minimum score required to get a loan. That means those borrowers will most likely not be able to pay their loans in full.
Forbearance: What After?
It all starts with wanting to own your family’s dream house. You then finally decide to apply for a mortgage loan. Mortgage loans shouldn’t be a problem. An expert mortgage broker can assist you by preparing the best loan based on your financial capabilities. It shouldn’t worry you as long as you pay your dues on time.
But it might be different during a pandemic. With many people furloughed or left unemployed by this health crisis, paying mortgage loans is at the bottom of people’s priorities these days. The government’s remedy to that is the mortgage forbearance under the Coronavirus Aid, Relief, and Economic Security Act or CARES Act.
The Consumer Financial Protection Bureau defines forbearance as a program where the mortgage lender allows borrowers to pause their mortgage payments. The lender will offer this only within a certain period. This is to give those who struggle financially the chance to improve their finances until such time that they can repay their loans. No documents are needed, and no additional fees and interest are imposed. Your lender will automatically approve your forbearance application due to the current pandemic situation.
Typical forbearance programs offer three to six months. If the borrower still could not pay the loan, it can be extended to 12 to 15 months. It was a big help to millions of Americans who have been struggling to pay their loans.
However, there are still some who haven’t exited their forbearance programs. What happens if your forbearance ends and you still can’t pay your loans?
Consider Your Options
If your forbearance is about to end, the first thing that comes to mind is foreclosure. Don’t worry. The government has already set a rule to assist borrowers who are still not capable of paying in full. Some states have policies on foreclosures and evictions. But, even if there are foreclosure bans, you might want to settle your mortgage loans to avoid problems in the future.
According to The Consumer Financial Protection Bureau, all you have to do is negotiate with your lender. Your mortgage lender can offer you other options depending on your loan terms and payment history. Loan negotiations are possible as long as you accept the lender’s terms. Here are the possible options that they can offer:
They can offer you terms where the amount you owe will be added to your monthly due. This means you will have to pay bigger every month to cover up all your missed payments.
This option will be given to you if you can pay your regular dues. Then, your lender will resume your missed payments at the end of your loan or if you have been able to sell your property or end your mortgage plan.
Usually, the lender gives you a long time to pay your loans in full. This is if you have proven that you are not capable of paying your regular dues. The lender can trim down the amount and add your missed payments to the whole amount you owe.
If you can pay all that you through lump-sum, that would be better. The problem is that not all agencies offer a lump-sum option. You might want to negotiate this with your lender, though.
Considering these options, you might want to consult a real estate attorney to guide you in making the right decision. You should consider your financial capabilities and liabilities as of the moment. Gauge if you are capable of paying off your loans in the future. Disagree with terms that you cannot fulfill.
The secret is to be realistic and honest with your financial situation. Doing so can help your lender determine your capability to pay within a given period. Don’t be caught off-guard; prepare for what can happen to you.