Need help avoiding foreclosure?
Just like nearly everything else in our lives nowadays, COVID-19 has made impacts on the housing scene in a variety of ways.
In this column we will talk about those people who may be facing foreclosure on their houses. In a future column, we plan to talk about the special needs of renters during this unusual time.
As you are likely aware, in an effort to keep people from becoming homeless during a world-wide pandemic, in March 2020 the U.S. federal government instituted a foreclosure moratorium as part of the CARES Act. This allowed people to stay in their homes even if they couldn’t afford to pay the mortgage due to COVID-related job loss, illness or other situations.
Now, after several false alarms, that moratorium is lifting, many people who haven’t paid their mortgages not only need to resume their payments, but they also owe all the money that they hadn’t paid each month!
“Foreclosure” simply means that someone who hasn’t finished paying off their house, loses it back to the seller or lender because they have not kept current with their monthly mortgage payments.
One way of avoiding foreclosure is entering into “forbearance.” This is an official agreement with the mortgage company to temporarily suspend or reduce your monthly mortgage payments for a specific period of time. This option lets you deal with your short-term financial problems by giving you time to get back on your feet and bring your mortgage current.
Forbearance is like a pause before entering foreclosure. For some, that pause is enough to get their finances in order so they don’t have to go into foreclosure.
We here at NeighborWorks of Grays Harbor are here to help prevent foreclosure if at all possible, and to let people know about all their options.
Our HUD-certified housing counselor, Julie, is available at no cost to help guide people into the best situation for them.
If you need to talk to Julie, give her a call at NeighborWorks of Grays Harbor at (360) 533-7828 (extension 102) and she will set up an appointment with you to look at your specific situation. You can leave your call back name and number on her message device, 24 hours a day.
Although people talk about “our” home, most people in the United States don’t own their house outright. Instead, they are paying monthly mortgage payments to a bank or another kind of lending institution. Typically, such loans are written for 15 to 30 years.
About 75 percent of the Americans with mortgages have them through either Fannie Mae or Freddie Mac, federally backed home mortgage companies. Others have their mortgage through the Federal Housing Authority (FHA) or private lenders.
“Regardless of where the loan is from, if you have trouble paying your mortgage, it is critical that you talk to your lender as soon as possible to make arrangements,” Julie said.
“Even if you haven’t missed a payment, but your situation has changed and you might struggle to make a payment, you need to contact them,” she said.
Julie says many, many people find the language and the concepts of financial and mortgages terms particularly confusing, simply because it isn’t something they deal with often. If that’s the case for you or someone you know, that’s another reason to talk with Julie. She can even contact the lender and help negotiate a new payment schedule on your behalf.
“Typically, what the lender will do is simply add missed payments to the back of the loan,” Julie said. “However, depending on the current economic situation of the homeowner, they might start paying a payment and a half. There are different options depending on what your financial status is,” she explained.
Julie is also aware of the timelines and steps involved in foreclosure, the rights and responsibilities of the homeowner as well as the various options to remedy the situation.
For instance, she knows that forbearance would give you time without payment or just a partial payment to get back on your feet. In addition, under the CARES act, a lender cannot require you to list your home until your forbearance is over. Even better news is that after the forbearance runs out, you can apply for another 180 days of forbearance.
Some good news!
One of the interesting results of the COVID pandemic is that in many places – including Grays Harbor – the property values went up, sometimes significantly!
That’s especially great news for those struggling to pay the mortgage because it means that some of that increase can be pulled out of the value of the home to use in restructuring a loan! It’s even possible, depending on how long someone has been paying a mortgage and how much the house has gone up in value, that payments under the restructured loan will be lower!
“If you’ve been paying your mortgage for 20 years, it may be a restructured loan might be wonderful for you right now,” Julie said.
“On the other hand, it may not be an option you want, but if you are going to lose your house we can discuss the possibility of ‘a deed in lieu of payment.’ That means you do have to give the house back; it is still a foreclosure, however, it is not as bad on your credit as a full foreclosure,” she explained.
Because each situation is unique and because the sooner the problem is addressed the more time and options there are, Julie invites people who are concerned to call her soon.
“I’m starting to see about three to five calls a week, but I have a feeling it might start going up. For homeowners this isn’t as bad as the crash of 2008 because the housing market is up so you can refinance to get cash out of your home to solve the payments in arears and come current. The downside is that it becomes a new loan and there will be fees involved, which may be added into the loan amount.”
One other tidbit, Julie offered, is that another part of the CARES act, is that people can get a free credit report once a week from each of the three national credit agencies until April 2022. One reason to do that is to ensure that none of the issues of paying off the mortgage is appearing on the credit report.
“It’s not supposed to be showing up negatively. That was also a part of the CARES Act,” she said.
“My job is to show people their options and help them walk through it. A lot of times they anticipate that it is worse than it really is,” Julie said.