Solutions for Homeowners Struggling with Their Mortgage

You’re not alone if you’re having trouble making your mortgage payments right now. According to RealtyTrac, one out of every 12,448 homes in the United States is in foreclosure as of December 2020. In Florida, one out of every 6,240 homes is in foreclosure, while one out of every 11,342 homes in California is in foreclosure.

The novel coronavirus pandemic has resulted in increased unemployment and income loss. If you think you are in danger of losing your home to foreclosure, you should know that there are services available to help homeowners get mortgage relief.

Mortgage Relief Options for COVID-19

For those affected by COVID-19, a moratorium—or postponement—on foreclosures and evictions is in effect if the mortgage is funded by a government program. The moratorium was originally set to end on January 31, 2021, but it was extended. However, depending on the government home-loan program, the extension expiration dates differ.

The Department of Housing and Urban Development, Department of Veterans Affairs, and Department of Agriculture have extended the enrollment window for borrowers to seek forbearance until June 30, 2021, for those who are interested. Forbearance is an agreement between the lender and the borrower to delay mortgage payments in order to avoid foreclosure.

The Federal Housing Finance Agency (FHFA) has extended the foreclosure moratoriums on single-family foreclosures and real estate owned (REO) evictions for mortgage loans guaranteed by Fannie Mae and Freddie Mac until March 31, 2021. REO assets are bank-owned properties that have been confiscated as a result of a borrower’s default or nonpayment.

The USDA’s Single-Family Housing Direct and Guaranteed loan program’s foreclosure moratorium expires on June 30, 2021, for USDA-backed mortgage loans.

Mortgage loans made by the U.S. Department of Housing and Urban Development (HUD) that are insured by the Federal Housing Administration (FHA) or subsidized by the Office of Native American Programs have also been extended until June 30, 2021. (Section 184 and 184 A loan guarantee programs). The Department of Veteran Affairs has also extended the eviction and mortgage moratorium for those with VA loans until June 30, 2021.

Facts

• For those affected by COVID-19, a moratorium—or postponement—on foreclosures and evictions is in effect if the mortgage is funded by a government program.
• Due to COVID-19, both Fannie Mae and Freddie Mac are providing financial support to those who are having difficulty making mortgage payments.
• If you can’t afford your mortgage payments, the first move is to contact your lender, whether or not it’s due to the coronavirus pandemic.

There are many ways for modifying your loan repayment to make monthly payments more manageable.

1. Request Mortgage Forbearance

   As previously reported, both Freddie Mac and Fannie May released guidelines for COVID-19.2 mortgage forbearance. Individuals may then minimize or cancel their payments during that period. Missed payments will not affect your credit score and any related mortgage delinquency will not be reported to the credit bureaus. After the forbearance period ends, lenders may work with borrowers to adjust loans if needed to reduce monthly payments.

2. Refinance to a Longer-Term Loan

   One way to lower your monthly payment is to spread your loan out for a longer period of time. According to Al Hensling, president of United American Mortgage in Irvine, Calif., refinancing to a longer-term loan is the easiest way to minimize monthly mortgage payments, particularly when cash flow is an issue.

   However, you should be aware that your interest rate will rise. To counteract this, Matt Hackett, underwriting and operations manager at Equity Now in New York, suggests making higher payments to accelerate principal repayment. Prepayment penalties are not common in mortgages (though you should definitely check yours).

3. Challenge Property Taxes

   According to Cara Pierce, a licensed housing counselor at Clearpoint Credit Counseling Solutions, a national nonprofit organization, if the value of your home has decreased, challenging your property tax can provide some financial relief. “You’ll need to contact the county tax assessor’s office in the county where the house is located to find out what kind of evidence they’ll require as proof that the housing prices have dropped,” Pierce says.

   Pierce, on the other hand, claims that this is a short-term tactic. She warns that as property prices grow, so will property taxes. Also, keep in mind that having your home appraised will cost several hundred dollars.

4. Modify the Loan

   For those who are unable to refinance their loan but need to reduce their monthly mortgage payment, a loan modification is an option. It does, however, necessitate a hardship, unlike a refinance. According to Pierce, borrowers must demonstrate to the lender that they are unable to make the usual monthly house payment due to financial hardship. This procedure necessitates the completion of detailed documentation, which must then be sent to the lender for review.

   The bills did not discuss or extend the federal eviction moratorium, which runs out at the end of March. The Biden administration also encouraged Congress to approve the President’s proposed $1.9 trillion coronavirus relief plan, which includes a Homeowners Assistance Fund, which will provide states with $10 billion in funding to help distressed homeowners.

   The safeguards, which were set to expire on March 30, extend to all federally guaranteed mortgages, which account for the vast majority of home loans in the United States. The acts, according to the Biden administration, would help 2.7 million homeowners who are currently in COVID-related mortgage forbearance, as well as expand forbearance to nearly 11 million government-backed mortgages across the nation.

   The actions, which were revealed by the White House, would extend until June 30 a series of homeowner safeguards that were first implemented last year as part of the federal government’s initial response to the pandemic. The measures would prolong the federal mortgage foreclosure moratorium, hold the forbearance registration window open for homeowners wanting to postpone their mortgage payments, and offer up to another six months of forbearance relief to borrowers who joined forbearance before June 30, 2020.

   President Biden signed legislation extending a federal foreclosure moratorium through the end of June, as well as mortgage forbearance relief for homeowners, to help mitigate the economic effects of the coronavirus pandemic on American households.

   Fannie Mae and Freddie Mac are also encouraging homeowners to change their loans after forbearance as part of their COVID-19 mortgage assistance plans.