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My Mortgage Forbearance Ended. Now What?

EH Law Group May 8, 2023

The Coronavirus Aid, Relief, and Economic Security (CARES) Act provided $2 trillion in federal funds to help Americans through the pandemic when the country faced lockdowns, and people’s income paused.   

Part of that act also allowed homeowners behind on mortgages to pause their monthly payments to weather the transition. Some private mortgage lenders also participated in the program.  

The extensions granted from the CARES Act were for 18 months, meaning most of them have expired or will soon, and for many, there are up to 18 months of back payments to be repaid. The question is: What happens when the extension ends? Depending on the lender and the borrower’s financial situation, various options exist.  

If you’re a homeowner in or around San Francisco or San Mateo, California, whose forbearance period has ended and you’re struggling to catch up and wondering what your options are, contact the attorneys at the EH Law Group.   

You may need to consider ways to get rid of other debts that make paying your mortgage challenging. We can advise you of your options under bankruptcy protection. From our offices in San Francisco and San Mateo, California, we proudly serve clients in all surrounding areas, including Santa Clara County, Oakland, Daly City, and throughout South San Francisco.   

Understanding Mortgage Forbearance 

The CARES Act provided relief during the Covid-19 pandemic for homeowners to pause their mortgage payments if their loans were backed by federal programs, including the FHA, VA, Fannie Mae, Freddie Mac, the USDA, and the like. Taking advantage of the program was not without its risks and consequences.   

One consequence, according to the credit reporting agency Experian, is that those who took advantage of the payment pause saw up to a 100-point drop in their credit score. This makes it harder to get loans or credit going forward. The main consequence, of course, is that the paused payments have to be repaid. 

My Options Now That Forbearance Has Ended 

Forbearance, of course, doesn’t mean the payments are forgiven. You will have to repay what was paused during the pandemic.  

Your options for repaying what was paused should have been explained to you when you took advantage of the program. Some lenders may have asked for a lump-sum payment once the forbearance period ends, but others had a steady repayment plan to cover the lapsed payments. Under a repayment plan, you resume normal monthly mortgage payments plus extra to make up for what was missed.  

You can also work with your lender to get a deferral, by which you resume the monthly payment you owed before forbearance, while the amount due from the paused period is simply added to the end of your loan. This, of course, means the loan will take longer to repay.  

You can also consider a loan modification, essentially a refinancing of everything that’s owed – principal and paused payments. In light of rising interest rates to combat inflation, however, this can be a costly proposition.   

Your original loan may have been in the low single digits, but now average rates have almost doubled from the golden years of a loose money supply. You may be able to stretch out the repayment period to keep the monthly amount affordable, however.  

You also can sell your house if you simply cannot meet the monthly obligation once the repayment part is added on. This, of course, means you’ll have to leave your home and find somewhere else to live, not a pleasant prospect, but it may be better than having your home foreclosed and seeing your credit score take a huge hit. 

New Rule to Help Avoid Foreclosure 

The Consumer Financial Protection Bureau (CFPB) has issued a rule to help struggling homeowners avoid foreclosure. The rule requires lenders to follow three steps before proceeding with a foreclosure:  

  • The first step is that the loan servicer must review a loss mitigation application submitted by the borrower. The application shows the borrower’s financial and household information.  

  • The second step is that the loan servicer must follow state and local laws to verify if the home has been abandoned before going forward with a foreclosure.  

  • The third step requires the lender to make a diligent effort to contact the homeowner before proceeding to foreclose. Foreclosure is permitted if the borrower is at least four months behind in their payments and has been unreachable for more than 90 days.  

There is also the option of reducing your unsecured debt through a bankruptcy filing, which might clear up enough cash to continue to make your mortgage payment. A Chapter 13 filing, for instance, allows you to pay off your unsecured creditors over a three- to five-year period with your disposable income – what’s left after meeting all your living expenses, including your home and car. This means your unsecured debt load will go down to only what’s affordable.   

Contact EH Law Group for Support 

If you have questions or concerns about your mortgage now that forbearance has ended, or is ending, contact us at the EH Law Group. Our team has the resources, knowledge, and skill to direct you toward the correct path. We have offices in San Francisco and San Mateo to serve clients in all surrounding communities of California.