I’m Behind in my Mortgage Payments…Now What?
You lost your job. You became ill. COVID-19 shut down your company. And now you’ve fallen behind on your mortgage payment.
There are any number of legitimate reasons for not being able to pay your mortgage. So, what can you do?
First, don’t panic. You have options and you can get help.
Step 1 is to call your loan servicer. Many people are scared and intimidated to call their bank or loan company but this is the only way to get ahead of the problem before the foreclosure process begins. Your loan servicer will tell you your options, which we will detail below.
Believe it or not, your lender wants to avoid foreclosure. It’s a tedious, time consuming and costly process for them and they would much rather have you keep your home. By keeping you in your home they avoid foreclosure, a short sale, wage garnishment, bank levies or collection agencies, or losing the ability to recover funds altogether. The key takeaway here is that you should not be afraid to call your lender. They want to keep you in your home (albeit for different reasons) as much as you want to stay in your home.
Hopefully we’ve convinced you to be proactive and get in contact with your bank or mortgage broker. Now, for help understanding your options, here is a list of the most common possibilities that will be presented to you when you are behind on your mortgage payments.
A forbearance agreement allows you to reduce or suspend your mortgage payment for a given amount of time. Due to the COVID-19 outbreak, the CARES Act was initiated to help with temporary payment relief. Remember, forbearance does not mean forgiveness. You will still be required to pay what you owe, so only choose forbearance if it’s absolutely necessary.
With repayment, you make up for what you owe over time. This is a good option for those who were hit hard for a period of time but their financial situations improved shortly after. In this option you will pay your full mortgage plus a negotiated additional amount until you are caught up on past due payments.
Reinstatement is paying off what you owe in one lump sum. When you’re already behind on your mortgage this might not be an option for most people. But if you have a family member or friend that is willing to help out, or if your financial situation improved, you can talk to your lender about reinstatement. Make sure you take a look at your mortgage contract as there should be information telling you the specifics on reinstatement.
Modifying your mortgage can be one of the best options for homeowners who are finding it difficult to keep up with their monthly payments. Loan modifications can reduce the interest rate, change the interest rate from variable to fixed, forbear some of the principal balance or extend the length of the loan term.
Refinancing is available if you have equity in your home. Your lender can let you know if refinancing is an option. If, however, your home is underwater you may still have options if you have a Fannie Mae or Freddie Mac loan. Their “High Loan-to-Value Refinance Option” or “Enhanced Relief Refinance” options could work for you.
What we hope you take away from this blog is a little hope and some alleviation to your fears. People fall behind on their mortgage. It’s not uncommon at all, especially since COVID-19 hit our economy so hard.
If you’ve fallen behind, don’t give up. Get ahead of the situation by being proactive and calling your lender. If you have a complicated position and you’re worried that none of the above options will be available to you, contact us immediately so we can help you understand your options and preemptively protect you.