The time to enroll in a mortgage forbearance program is ending. President Joe Biden extended the foreclosure moratorium and mortgage payment forbearance enrollment window in February until June 30, 2021 for federally backed mortgages, including loans backed by Fannie Mae and Freddie Mac. But for many who enrolled in the initial forbearance program at the beginning of the coronavirus pandemic, their final extensions for the 18-month period are drawing to a close.
For many, forbearance exit assistance options have been smooth, and foreclosure starts and inventory hit record lows in April, according to data from Black Knight. If you are struggling financially but your forbearance period is ending soon, there are multiple options available to help you avoid mortgage foreclosure.
"Ourselves, the GSEs, as well as different governmental bodies, whether that's HUD, or the FHFA, and/or the CFPB to the extent that they were involved, we all work together to try to find solutions together to protect homeowners," said Baron Silverstein, New Residential Investment Corp. president.
Visit Credible to talk to a home loan expert today about the options available to you, including a mortgage refinance to change the terms and loan rate of your home loan.
For those exiting mortgage forbearance, there are five options available to help get homeowners back on track while avoiding foreclosure. Currently, the Consumer Financial Protection Bureau (CFPB) has issued a pause on all mortgage foreclosures until 2022, but homeowners who don’t prepare this year could see their mortgage foreclosed in the year ahead.
In fact, Silverstein explained the government is continuing to expand options available for homeowners facing financial difficulties, including possible payment relief or an extension to suspend payments.
"There likely will be further extensions, and there’s definitively going to be further release and resources available to the homeowner still facing these financial concerns," he said.
Here are five ways to exit mortgage forbearance while minimizing your risk of foreclosure:
1. Refinance: Borrowers who refinance their mortgage can change the rate and terms of their mortgage loan. In doing so, they would pay off missed payments from their COVID-19 forbearance plan when refinancing and begin a new home loan under new terms. This could lower their mortgage rate, change the loan terms and decrease a monthly payment. For loans backed by Fannie Mae and Freddie Mac, there are more flexible mortgage refinance options available.
If you are interested in seeing your refinance options, visit Credible to compare rates from multiple lenders at once.
2. Reinstatement: Using this method, homeowners simply pay back all of their missed payments. Once they repay the missed loan payments, they would resume regular mortgage payments. While this option is simpler, it's not financially feasible for many homeowners.
3. Repayment plan: With a repayment plan, homeowners can pay an additional amount each month in addition to their regular mortgage payment until the missed payments are paid off.
4. Flex Modification: If homeowners have been permanently impacted financially and will be unable to make their monthly payments, they can look at a loan modification plan. Similar to a refinance, the homeowner would add the missed payments to their principal balance and change the terms and mortgage rate of the entire loan. However, unlike a refinance, homeowners would stay with their current lender and simply change the loan terms, as well as have to demonstrate financial need for this option.
To see if you are eligible to a modification, contact Credible to speak to a home loan expert and get answers to all of your questions.
5. COVID-19 payment deferral: Utilizing this option would allow homeowners to simply begin making their monthly mortgage payments like before coronavirus pandemic, making the missed amount due either at the maturity date of the loan or when the homeowner refinances.
There are several options available for homeowners when they exit forbearance plans in order to help them avoid foreclosure. To start, Silverstein said, they simply need to reach out to their mortgage lender or servicer to request an extension or loan modification.
"If a homeowner has trouble at all with affording their mortgage, they need to reach out to us," he said. "They just need to contact us, I think that's the most important thing. Our biggest issue with respect to consumers that we’re trying to provide any kind of support or help to is trying to get in touch with them, and they need to reach out to us."
Visit Credible to view your home loan options and view multiple lenders at once.
Have a finance-related question, but don't know who to ask? Email The Credible Money Expert at email@example.com and your question might be answered by Credible in our Money Expert column.