As the number of coronavirus cases in the US rise, many will find themselves unemployed or with cut hours. Yet your expenses have gone up due to unforeseen purchases. This can easily lead to financial struggles. Normally our largest expense is our mortgage payment so if we can find assistance here, it can be a relief.
There is a lot of information out there on mortgage forbearance/deferrals and foreclosures. Some of this information only applies to certain loans so make sure you ask questions before you agree to anything. Don’t assume that the bank will automatically stop payments or foreclosures. They won’t.
If you feel that making your mortgage payment will be an issue, contact your lender sooner than later. They may offer a mortgage forbearance or deferral BUT BEFORE YOU APPLY/AGREE MAKE SURE YOU KNOW THE TERMS.
A mortgage forbearance or deferral could allow homeowners to skip a few mortgage payments so that you can use your current funds on other unforeseen expenses until you return to work. This all sounds great, right!? Ask for details.
Most lenders will accumulate the skipped payments for a period of time and they will be all due once the period ends. Some lenders expect a lump-sum payment, while others offer repayment plans added to your normal mortgage payment.
We saw this happen after Harvey. Some of us contacted our lenders after Harvey and were offers a forbearance/deferral as a solution. Some of these same people were surprised to find out that after the 3-4 months of forbearance/deferral they owed 3-4 months of mortgage payments all at one time! I personally don’t feel that this is a solution. In fact, in most cases it makes matters worse.
When I hear the word deferral, I incorrectly assume that the payments are simply tacked onto the end of the loan. Although some lender did this, most did not. So ask before you agree to this assistance.
Another question to ask your lender is how your escrow will be handled. Normally part of your monthly payment will be deposited into your escrow account. This account will then pay for your insurance and taxes. What happens if you don’t make a payment for several months? Your escrow account will be short and you will get a large bill come the end of the year.
A better option might be a mortgage modification. Normally a modification will allow you to skip a few payments and they will be added to the end of the loan or the mortgage balance is altered so that the payments are divided amoung the remaining months. Every bank does this different so ask for details.
President Donald Trump recently stated that the Department of Housing and Urban Development will suspend “all foreclosures and evictions” for a period of time. All single-family borrowers with a FHA-insured mortgage are eligible. What does this mean? It means that not all mortgage holders will fall in this suspension. It depends on the type of loan you have. If you are behind on your payments, call you lender and see if you qualify. Don’t assume you qualify. The foreclosure process in Texas is quick. Its best to speak to your lender as soon as possible.
HUD Guidelines of foreclosures and evictions (FHA loans)
Consumer Financial Protection Bureau
Federal Housing Finance Agency