What to do if you can’t make your mortgage payments

Courtland Young CA. BRE #01468400 NMLS#1692428
Courtland Young CA. BRE #01468400 NMLS#1692428
Published on April 6, 2020

It seems like only yesterday that the words “foreclosure” and “short sale” were plastered all over the headlines as millions of Americans lost their homes during the Great Recession.

Now, we are starting to see these words all over social media accounts due to the COVID-19 pandemic’s effect on the economy.  Personally, I am starting to see a few more than normal in the market place, but that really isn’t saying much because we really haven’t had that many over the last few years. Now, nobody has a crystal ball and know one really knows what will happen nor how long this will last, but one thing is for sure the Real Estate market has changed.

Inventories levels still remain low, but because of tightening lender requirements and the tens of millions of people on unemployment the demand has seemed to drop at least for now. If you are one of those millions of people don’t worry for now.

All it takes is the prospect of missing one mortgage payment, however, to bring back all those dreadful memories from years ago.

Put “foreclosure” to the back of your mind. We have some suggestions to help you deal with the prospect of being unable to make your mortgage payments.

You’re safe for now

The FHA has ordered foreclosures to cease for 60 days across the U.S. in response to the coronavirus pandemic. Furthermore, Governor Newsom has taken a executive action to put a stay on evictions.

Good news for the tens of thousands of Americans who have lost their jobs over the past few weeks. At least for one month, they will have one less bill to worry about.

But what happens next month? A lot depends on your current financial picture. If you’re a saver, you have far more options than those Americans who live paycheck-to-paycheck.

That first call

It’s a scary one – calling your mortgage company to tell them you can’t make your payment. But, call you must and afterward, you’ll be glad you did.

Many mortgage companies and banks are offering deferral programs known as a forbearance agreement during the COVID-19 crisis.

Keep in mind that this forbearance isn’t forgiveness and you’ll be expected to make up the missed payments at a later date, Usually all at once in what could be a balloon payment. Your lender may even spread the payment over 3-6 months, but they will add the amount to your current mortgage (unless you can convince them to tack the missed payments onto the end of the loan).  If you are unable to convince your mortgage company to add your payments to the end of the loan you’ll probably be in good shape.

But, keep in mind the interest on the loan will most likely continue to accrue.

You will most likely need to offer proof of your hardship and many lenders require pay stubs and bank statements (to show a declining income) and a profit and loss statement from the self-employed.

What if my lender won’t work with me?

We have yet to hear of a lender who is refusing to at least listen to homeowners at this time. This doesn’t mean they don’t exist. If you have a conventional loan and the lender refuses to work with you, call a HUD-approved housing counsellor at 800-569-4287.

Borrowers with FHA-backed loans will find help dealing with their lender by calling the National Servicing Center at 877-622-8525. You will be asked to provide the names of all people listed on the mortgage and the full address of the property. If you have your loan settlement statement handy, jot down the 13-digit FHA case number. This may get you faster service.

VA borrowers can find help on the U.S. Department of Veterans Affairs website.

Additional solutions

If your lender won’t work with you, or you prefer not to pursue the aforementioned solutions, consider the following ways of dealing with mortgage payments that you cannot afford at this time:

  • Sell the home
  • Apply to refinance your mortgage

Avoid foreclosure prevention scams

During the Great Recession, foreclosure prevention scams became a cottage industry. While we haven’t seen any recently, if the crisis continues, they may pop up again.

Many of these scam companies chose names and phone numbers that were quite similar to those of government programs. They charged high up-front fees while promising to pay off the borrower’s delinquent mortgage.

If you have any questions or suspicions about offers you receive, call a HUD housing counselor (800-569-4287) or reach out to us and we’ll point you in the right direction.

And as always you can reach out to me Courtland Young for any Real Estate or Mortgage Questions. Courtland Young CAL BRE#01468400 NMLS#1692428

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