Mortgage forbearance is when your mortgage servicer or lender allows you to pause or reduce your mortgage payments for a limited time if you are having financial difficulties. Although forbearance sounds like a great idea, there are some things you should consider before agreeing to forbearance.
If you want to avoid foreclosure, you have options. Contact our Irvine foreclosure defense attorneys today at (949) 570-5025 to learn how we can help you save your home and restore your financial security!
How Does Mortgage Forbearance Work?
Forbearance is under the CARES Act, which allows homeowners to completely pause their mortgage payments for a specified period. It doesn’t forgive or erase payments; it only pushes them back to a later time. You will still be responsible for paying any missed or reduced payments in the future.
Once your forbearance period ends, your lender will contact you and notify you of how many payments you missed and what you will need to repay. There are various forbearance options, such as U.S. Department of Agriculture (USDA) loans, that won’t require you to pay back the amount that was suspended. For such reasons, it is vital to clearly understand the terms and conditions of your mortgage forbearance agreement.
Will I Be Required to Make a Lump-Sum Payment on the Suspended Amount?
In most cases, homeowners who receive forbearance under the CARES Act are not required to repay their skipped payments in a lump sum once their forbearance period ends. You should verify with your mortgage lender to make sure this is the case.
For example, say you can’t make mortgage payments, and you ask your lender to reduce your $2,400 monthly mortgage payment by half for three months. After the three months are over, you will have one year to pay back the amount reduced. This means that your monthly payments after the three months will be $2,700 ($2,000 + $3,600/12). Essentially, your monthly payments will increase by $300. It is important to note that interests on any reduced amounts will continue to accrue until you repay them.
Issues with Mortgage Forbearance
What many people don’t know about mortgage forbearance is that California has loose laws, making it easy for lenders to take advantage of homeowners. In most cases, the suspended payments will still incur interest until you pay them, and monthly payments after forbearance can be extremely difficult to pay after stuffing financial issues. In many cases, homeowners are left with overwhelming debts after a mortgage forbearance. If the borrower can’t continue to make payments after the mortgage forbearance period ends, the foreclosure sale takes place within days.
Since forbearance can make a financial situation worse, it is important to identify other avenues before agreeing to forbearance.
Irvine Foreclosure Defense Lawyers
We understand that making mortgage payments can be difficult in the current economic state. However, mortgage forbearance could end up hurting your situation in the long run. Speaking with an attorney before making a decision could help you discover new debt relief options that can help you regain your financial security.
Our foreclosure defense and debt relief lawyers at McFarlin LLP have helped homeowners throughout Southern California keep their home, and we are ready to help you too. Let our attorneys examine your situation and figure out the right plan for a successful foreclosure defense. Sometimes, this involves helping you coordinate money loans and bridge loans so you can have enough equity to avoid foreclosure.
We are here to help you from beginning to end. Contact our foreclosure defense attorneys today at (949) 570-5025 to schedule a consultation!