With the coronavirus numbers still on the rise and amidst the struggling economy many Dayton homeowners have a hard time keeping up with their mortgage payments. Recently, the government has announced an extension of the mortgage forbearance and foreclosure relief programs introduced when the pandemic first broke out last Spring. Some homeowners may not know exactly what a mortgage forbearance is and if it’s something they should consider. Additionally, depending on your mortgage provider you may or may not qualify for the new relief programs.
What is a Mortgage Forbearance and How Does it Work?
We are talking about mortgage loan forbearance when your mortgage servicer or your lender grants you permission to pay lower mortgage payments or not to pay anything at all for a limited amount of time. However, at some point in the future, depending on your lender’s requirements, you will need to pay back what you owe. During the time your loan is in forbearance the amount you owe on your mortgage doesn’t just cease to exist.
Do I Qualify for the New Mortgage Relief Programs?
Depending on your income, your credit score and several other conditions, you may qualify for some federally backed mortgages. These mortgage lenders are the Federal Housing Administration, the U.S. Department of Agriculture, the U.S. Department of Veterans Affair as well as Fannie Mae and Freddie Mac.
If you have a home loan through the Federal Housing Administration, the U.S. Department of Agriculture or the U.S. Department of Veterans Affairs you can request the forbearance until June 30. Due to the CARES Act and the recently announced government relief programs you may be relieved from making a mortgage payment for up to 18 months.
If your mortgage lender is backed by Fannie Mae or Freddie Mac you may enroll in forbearance only until the end of February 2021. But check with your lender, as programs could be extended. Furthermore, with this type of loan you may be able to delay your mortgage payments for up to 15 months. This is not automatic. You must apply and be approved for the mortgage forbearance.
How Do I Know Who My Mortgage Lender Is?
Some homeowners get confused when distinguishing between their mortgage lender and their mortgage servicer. Your mortgage lender is the financial institution which loaned you the money for your home mortgage. Your mortgage servicer is the company which sends you your monthly mortgage statements, processes your payments and communicates with you if there are any issues. Your mortgage servicer may or may not own your loan. Your mortgage lender owns your loan. Mortgage lenders often sell loans so you get a new mortgage servicer, or they may hire a different company to service your mortgage.
If you don’t know who your mortgage lender is contact your mortgage servicer via contact information you receive on your monthly statement. There are also several tools online where you can check who owns your mortgage, such as the Mortgage Electronic Registration Systems (MERS) website.
Once you determine who your mortgage lender is you can submit your request for mortgage forbearance. Because of the pandemic, in order to obtain the forbearance you don’t need any proof you have suffered a financial hardship other than your word.
Keep in mind, if your loan is already in forbearance you may need to re-apply because the relief programs come in six-month and three-month intervals and do not automatically renew.
What Happens When Mortgage Forbearance Ends
When the forbearance period ends, in some cases, you need to pay back what you owe. However, if your home loan is a government-backed mortgage you don’t have to pay the whole sum at once right after the relief period ends. You can request for your mortgage lender to carry over the missed payments to the end of your loan. For example, if you own a 15-year mortgage and you haven’t made your payments for the last year, your mortgage will now become a 16-year loan.
However, if your mortgage is owned by a private investor or a bank you may be asked to pay back the full amount owed at the end of your forbearance period. You should contact your mortgage lender for clarification.
The Federal Government has also issued a relief program for homeowners facing foreclosure. If your mortgage lender is backed by Fannie Mae or Freddie Mac you are safe from foreclosure through the end of March. If your home loan is owned by the Federal Housing Administration, the U.S. Department of Agriculture or the U.S. Department of Veterans Affairs you will not face foreclosure until the end of June. However, a mortgage lender can foreclose on a property if its owner vacated or abandoned it.
Despite the government help, between the pandemic and the poor economy, many homeowners in the Dayton area still worry they won’t be able to make payments even after their forbearance has ended. If you suspect you won’t be able to make payments on your mortgage you should contact your mortgage servicer as soon as possible. Explain why you can’t pay your mortgage and ask for help in order to avoid foreclosure. Additional time may be available.
Your mortgage company can evaluate your situation and give you some options to help you keep your house. For example, your lender may offer to lower your monthly payments which would prolong the loan term but you will be able to stay in your home.
Homebuyers beware! Unfortunately, even during these trying times there are foreclosure scammers preying on struggling homeowners. These scam companies will guarantee to help you avoid foreclosure and assist you in changing the terms of your loan. Foreclosure scammers typically ask for money upfront and tell you not to send the payment to your mortgage servicer but directly to them. They may be using logos similar to government seals and they may ask you sign several documents.
Depending on your circumstances, your mortgage lender will help you avoid foreclosure and get back on track with your mortgage payments. Homeowners don’t need to pay extra for their lenders or servicers assistance.
As an exclusive buyer agency our team assists home buyers in choosing the best mortgage offers. If you have questions about the Ohio real estate market, Dayton OH homes, or any other housing related matter, please contact us today at 937-433-6838 or send us a message!