What Options Do I Have After the Covid Mortgage Moratorium Ends?
The economic impact of the pandemic has caused havoc for homeowners in Florida and throughout the country. While the Covid-19 mortgage moratorium helped people remain in their homes during the height of the pandemic, with its end homeowners who are behind in their payments may find themselves facing foreclosure actions. The moratorium on initiating new foreclosures or continuing foreclosure proceedings ended on July 31, 2021.
During the pandemic, many homeowners received mortgage forbearance that allowed them to delay or reduce their monthly payments for a specified time period. The last date to request initial forbearance for federally backed loans, which can last as long as 12 months, was September 30, 2021. Other timeframes for forbearance ending will be different, depending upon when you first applied for forbearance or the terms of your agreement with a private lender. You can read more details about mortgage forbearance in this previous blog post.
So, what options do you have for avoiding foreclosure when you come out of forbearance and the Covid mortgage moratorium has ended? Every homeowner’s situation is different, but the following sections discuss some potential options for staying in your home.
Possible Ways to Avoid Foreclosure
If your forbearance is coming to an end and you are worried about how you will pay back what you owe and be able to make your regular mortgage payments, following are some ways to potentially avoid foreclosure:
- Loan modification
- Payment deferment
- Repayment plan
Every lender, loan and borrower’s situation is different. There may be additional foreclosure avoidance options based on your unique circumstances. You can contact your lender to learn what options you may have, and it is also wise to get advice from a Florida real estate attorney who assists in negotiating loan modifications.
In a loan modification, you reach an agreement with your lender to restructure your existing loan in order to reduce monthly payments. A loan modification could include:
- Lengthening the term of the loan
- Adding past-due amounts to the unpaid principal balance and re-amortizing the loan for a new term
- Temporarily or permanently reducing the interest rate
- Forgiving late fees and penalties.
The loan type could also be changed in a modification. For example, if you have an adjustable-rate mortgage (ARM) it could be converted to a fixed-rate loan. While ARMs may be beneficial in reducing payments for the short term, when interest rates rise or the fixed-rate period ends for hybrid loans, many homeowners can find themselves with high monthly payments that are unmanageable. ARMs, as well as interest-only loans in which you pay only the interest due each month for a set number of years while not putting any money toward the principal, were very popular during the early 2000s because they helped people get into homes they could otherwise not afford. These types of loans, which are more closely regulated today, were widely blamed for contributing to the 2008 housing crisis that caused many people to lose their homes to foreclosure.
After exiting Covid forbearance, borrowers may be able to defer the payments they missed to the end of the loan term. When you sell your home in the future, refinance it, or pay off your loan, you pay the missed payments. However, with a payment deferment, you may be expected to resume making your regular mortgage payments as soon as you exit forbearance, which may not be viable if you are struggling financially.
In a repayment plan, a percentage of the payments you missed during Covid forbearance are added to your monthly mortgage payments, until they are paid off. How much will be spread throughout current payments depends upon what agency backs your loan. And, of course, if you don’t have the money to make your current mortgage payment, this is probably not an option for you.
Refinancing a loan may be an option for homeowners who have not yet missed payments but may be in danger of doing so. With a refinance, you get a new loan as opposed to a loan modification, which restructures an existing loan. Because it is a new loan you don’t have to stay with your current lender, so you can shop around. If your credit is still reasonably good, you may be eligible to refinance to a lower interest rate or get another type of loan that reduces your monthly payment.
Consumer Financial Protection Bureau Safeguards
Although the federal government didn’t extend the moratorium on foreclosures, the Consumer Financial Protection Bureau put some safeguards in place to help people coming out of forbearance who may be facing foreclosure. These protections, which will be in effect until January 1, 2022, apply to homeowners with federal or private mortgage loans who are more than 120 days behind on their payments. Under these protections, lenders must:
- Thoroughly review and consider loss mitigation applications from borrowers. They must not begin foreclosure proceedings unless all foreclosure avoidance options have been exhausted.
- Make a reasonable effort to reach homeowners before starting foreclosure proceedings.
- Confirm that properties are abandoned under Florida and local laws before starting foreclosures.
If your mortgage forbearance is coming to an end and you are unsure of what to do, you may benefit from skilled legal advice. Plantation, FL, attorney Carlos M. Amor focuses in helping homeowners avoid foreclosure and keep their homes when they are behind on mortgage payments.
Contact Trusted Florida Attorney Carlos M. Amor for Guidance
As you can see, there are alternatives to foreclosure for homeowners negatively impacted by the financial effects of the pandemic. Attorney Carlos M. Amor can help you learn what options you may have to keep your home, based on your individual situation. And if your options are exhausted and foreclosure is likely, you can trust our respected foreclosure attorney to aggressively advocate for your rights and interests. Call today at (954) 453-7200 to schedule a time to speak with us. Attorney Carlos M. Amor offers free consultations, by phone, via video meeting or in person.
ATTORNEY CARLOS M. AMOR
Carlos M. Amor is a skilled and experienced attorney and real estate broker. His legal practice in South Florida focuses on real estate litigation, real estate investments, tax deed and foreclosure auction purchases, traditional real estate transactions, short sales, foreclosure defense, and civil litigation. Carlos thinks “outside the box” and takes a practical approach to finding solutions that benefit his clients. [ Attorney Bio ]