Strategies to consider if you’re exiting a Mortgage Forbearance plan
If you entered into a CARES Act Forbearance Plan/Covid Hardship Forbearance for the Mortgage on your Home and are ready to exit the program or planning to soon, you’re most likely considering the available options for your next steps.
Homeowners of owner occupied properties are offered a variety of options and programs after they exit Forbearance. Available options vary, depending on the Lender, the type of Loan, and the Borrower. Most important to note is that if you have a conventional Loan that’s owned or guaranteed by Fannie Mae or Freddie Mac (the majority of Conventional Loans are), an FHA/HUD loan, VA loan, or USDA loan, these Loans DO NOT REQUIRE lump sum repayment of the missed payments when your Forbearance plan ends.
The end of Mortgage Forbearance DOES NOT MEAN that Foreclosure is the next step and doesn’t mean that millions of foreclosed Homes will be coming on the market because their Owners exited Forbearance plans. For properties that will be foreclosed, it’s important to note that many steps are required to occur prior to reaching Foreclosure, so it isn’t an immediate process, every case isn’t the same, and the loss mitigation methods that are currently used by servicers are significantly different from the methods that were used many Years ago during the 2008 crash. Today’s Homeowners are also offered many more options to help them save their Homes now vs. then. As a South Florida Realtor since 2006, I’m thoroughly familiar with the circumstances, the differences, and the market.
Several Loan options are available after exiting a Forbearance. They include, but aren’t limited to, the following:
- A Partial Claim or a deferral: If you can afford to start paying your regular monthly Mortgage again, the Mortgage payments that you missed can be deferred and placed at the end of your Loan or placed in a Junior Lien that will be paid when you end your Mortgage, sell the property, or refinance.
- Loan modification at the current Interest Rate.
- Refinance the Mortgage.
- A repayment plan that allows you to repay the past due Mortgage amounts over a specified period of time.
- Loan options that include a combination of Loan modification and partial claim.
- Fannie Mae and Freddie Mac Flex modification: Flex Modification offers eligible homeowners mortgage payment relief by extending the term to 480 months and targeting a 20% principal and interest reduction. The modification may also result in a lower interest rate.
- Reinstatement: You may choose to repay the missed payments in a lump sum when you exit the Forbearance program, but it’s not a requirement, as mentioned above.
Of course, a Homeowner may also decide to sell their property after exiting Forbearance and/or buy another property after exiting Forbearance.
I included resource links below: