According to a recent survey by the Mortgage Bankers Association, 4.36 percent of mortgage home loans were delinquent at the end of the first quarter of this year. Given the dire unemployment situation in this country, experts believe this is just the tip of the iceberg.
If you’re having trouble making your mortgage payments BILLSHARK wants to let you know what you should do.
Don’t ignore the situation
If you can’t make your mortgage payment, don’t just sit back and hope the problem will magically disappear, or that you’ll win the lottery between now and your next due date. There are steps you can take to make things right with your lender, but if you do nothing, not only will you badly damage your credit, you’ll be headed toward foreclosure that much faster.
Nearly all mortgage lenders are offering some type of forbearance program due to the economic crisis triggered by the coronavirus pandemic. Forbearance means you can defer (not wipe out) your mortgage payments for a period of time, with the agreement that you’ll either pay the entire amount of missed payments within a certain timeframe or have them added to the end of your mortgage. Be aware that all forbearance programs aren’t the same, and mean different things to different lenders.
Definitions
First, understand your options.
According to mortgage backer Fannie Mae, forbearance is a temporary reduction or postponement of your mortgage payments. By obtaining a forbearance plan from your lender, homeowners can reduce or make no mortgage payments for a period of time.
A forbearance plan doesn’t erase the amount you owe on a mortgage. At the end of the forbearance period, you do have to repay what you missed. But you can pay that amount back over time or all at once, whatever works best for you.
You will not be charged late fees during your forbearance period, and, thanks to the Coronavirus Aid, Relief, and Economic Security (CARES) Act, if you were in good standing with your mortgage before the coronavirus hit, your credit won’t be impacted.
Before your forbearance plan ends, your lender will contact you and offer you options for repayment, depending on your individual needs. (You won’t have to make this decision prior to going into forbearance.)
These are:
- A repayment plan that allows you to spread out your past due amount over a set time frame (usually three, six, or nine months). This means paying back the amount that was suspended temporarily in addition to your regular monthly payment.
- Reinstating your loan, which means that, if you can manage it financially, you can repay the amount owed in one lump sum, which leaves your mortgage to continue under the terms you originally agreed to.
- A loan modification, which changes the terms of a loan so that the monthly payments are more affordable. Depending on the situation, a loan modification can mean reducing your interest rate, spreading out your payments, or adding the delinquent amount to the end of your original loan term.
It’s important to know the differences in these terms because you might think you’re asking your lender for a forbearance, while they’re thinking of a repayment plan or loan modification.
What to do
Step 1: Find out who backs your mortgage
This is the most important piece of information you’ll need as you consider your options. Under the CARES Act, any loan which is federally backed (approximately 70 percent of all current loans), must be available for forbearance for up to one year, with no fees, penalties, or additional interest added to the loan.
If you’re unsure whether your loan falls into this category (it could be Fannie Mae, Freddie Mac, the FHA, VA, USDA, or other government entity), call your servicer (see below) which must provide you with this information.
Those with loans that are privately held unfortunately don’t have the same protections, although financial regulators have encouraged such institutions to work with borrowers.
Step 2: Find out who services your mortgage
This is the company you send your monthly payments to, not necessarily the institution that originally approved the loan (loans are frequently sold to third parties after origination).
Step 3: Talk to a certified housing counselor
Before calling your mortgage servicer, get in touch with a certified housing counselor to help you understand your options given your financial situation. They can also help you contact your mortgage servicer and prevent you from agreeing to something that: a) you don’t understand, or, b) is wrong for you.
The Department of Housing and Urban Development (HUD) offers a list of approved housing counselors nationwide. Be sure to find one that offers advice for free as well as one not paid by a lender.
You can also contact the Consumer Financial Protection Bureau (CFPB) for advice and assistance.
Avoid these scams
As surely as summer follows spring, any crisis that causes human suffering brings the scammers out of the woodwork. So here are two to beware of:
- anyone who contacts you by phone, email, text, or social media promising to get you mortgage relief; and,
- the “we’ll pay cash for your house” people.
Hang up on or delete communications from the first group, and do your homework very carefully on the second (BILLSHARK will feature a blog in the future providing more information on the latter—in the meantime, try the above options for forbearance first).
Remember that BILLSHARK is on your side when it comes to finding unnecessary charges and fees on your bills. We’ll review your bills for free, so send them to us and see how much money we can save you every month!