Forbearance and Foreclosure: What Are Your Options?
The federal foreclosure moratorium that was part of the pandemic CARES Act is officially over. In a basic sense, this means foreclosures and evictions can happen again. However, it’s not like there will be a flood of foreclosures overnight. It takes time and many homeowners still have options. Here are a few things you should know if you were in mortgage forbearance and are worried about impending foreclosure.
What Happens Next?
Just because the foreclosure moratorium ended, it does not mean that banks and lenders are going to after all your back payments tomorrow. You will ultimately have to make up missed mortgage payments, but no one expects you to pay it all immediately. If you were able to work with your lender to grant forbearance, you should be able to continue working with them to figure out a reasonable solution moving forward.
If you have been ignoring any outreach from your mortgage lender during the pandemic and just been hiding behind the foreclosure/eviction moratorium, then you may have less time and fewer options. Lenders now have the right to induce foreclosure proceedings. Even then, it takes some time for a foreclosure to happen. They will contact you and give you every opportunity to catch up on your payments before they officially put the hammer down. Lenders and banks generally lose money when they have to foreclose. They may give you a chance to work out a solution. You just can’t continue to ignore them and skip payments or foreclosure will be inevitable. Make an effort to reach out to them and understand your options.
What if I Have Been in Forbearance?
For those who have been in forbearance, you will need to work with your lender to understand the repayment options and structure a payment plan. You may simply be able to “push back” your mortgage payment schedule, picking up where you left off. Or, there may be some other sort of agreement that allows you to stay in your house and continue making payments.
Borrowers of federally backed loans (Fannie Mae or Freddie Mac) can also request a forbearance extension until September 30. This buys you a little time to figure out your plan, but you still have to find a solution.
Is it Time to Try and Sell My House?
If you have been in forbearance or are potentially facing foreclosure because you are too behind on mortgage payments, one option to consider is selling your house as soon as possible. Depending on your overall financial situation and homeownership standing, you may have enough equity in the home to still make a profit. Or, at the very least, you can get out from under the financial burden of your property. Breaking even or losing a little money is much better than waiting for foreclosure to happen. Foreclosure will destroy your credit and make it much harder to buy a home in the future. Any equity you’ve earned in the home will be lost. The bank simply takes your property because they have the legal right to foreclose if the borrower is significantly delinquent on their loan.
What Steps Should I Take?
Whether you are in forbearance and/or worried about foreclosure now that the federal foreclosure moratorium has been lifted, your first step should be to reach out to your mortgage lender. These are tough times and they are likely going to be willing to work with you if you make the proactive effort. If you don’t, they’ll eventually have no choice but to begin the foreclosure process.
If your repayment options are unmanageable or you know you can no longer afford your mortgage payments now that they are due again, it may be time to sell while you still can.
If you would like to discuss your home selling options or get a fast and fair cash offer for your house, contact PropertyLark today. We’ll help you figure out what is best for your situation. Just fill out the contact form on any page of our website to get started.