FIVE of the country’s largest banks announced recently that they have agreed to temporarily suspend mortgage payments for homeowners affected by the virus. California has indeed suffered an unexpected economic devastation from the virus with more than 1 million Californians applying for unemployment benefits since March 13.
So far, Wells Fargo, U.S. Bank, Citi, JP Morgan Chase have said that they will defer mortgage payments for 3 months. Bank of America said that they will only do it for one month although this could change.
With millions of people out of work nationwide, the requests for mortgage forbearance has risen by at least 1900%. The recently passed CARES act allows people with federally backed loans to delay payments and be relieved from accumulating interests for up to 12 months. Of course, this is quite a relief for a lot of people who can’t even pay for basic living expenses let alone afford their mortgage payments. Since most people live paycheck to paycheck, one month of no income can easily cause financial problems to snowball. The average family has less than $5,000 in savings, and that can run out pretty quickly.
The purpose of this article is to briefly explain what a “forbearance” is so that potential problems down the road can be avoided. One thing to remember is that your bank still expects you to pay the missed payments at some point, ant it may even require that you pay everything back in a lump sum. So ,it is important for you to find out from your lender exactly how and when the missed payments will be due so there are no surprises in the end.
Again, this is NOT mortgage payment forgiveness. A forbearance is simply an agreement that allows you to pause or reduce payments for a limited period of time without your lender starting the foreclosure process. By accepting a forbearance, you agree to resume making payments after the forbearance period, pay all the accumulated back payments, including interest, to bring your account up to date.
How the skipped payments will be paid back is very important for you to know NOW, not later. Your lender may put you on a repayment plan (which means that you make your regular mortgage payments plus an extra amount each month until you are caught) OR ask that you pay everything back all at once. If it’s the former, that will be easier for most people although can still be difficult if your monthly income remains the same. If the latter, that could prove to be impossible for a lot of homeowners and can lead to the loss of the home in foreclosure.
If you are unable to bring your account current under either option, the bank may need to modify your loan. This happened back in 2008 during the last recession when the Obama Administration came out with the MHA (Making Home Affordable) Program. After that program expired years later, banks continued to modify loans using their own investor guidelines. A loan modification alters the terms of your original mortgage either by reducing the interest, extending the payment terms or even deferring or canceling part of the principal. It remains to be seen whether the government will eventually pass similar laws to help struggling homeowners at this time.
If you or someone you know is struggling with their mortgage payments at this time due to the virus, I can help evaluate the situation advise on available options. Most people who are in this situation, I’m sure, are also struggling with other debts such as credit cards, car loans, personal loans, payday loans, etc. and don’t know which debts to pay first. Again, I will thoroughly review your case and am offering a free consultation.
NOTE: Due to the current lockdown order caused by COVID-19, I am offering free consultations BY PHONE to anyone who needs help in dealing with their debt problems.
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None of the information herein is intended to give legal advice for any specific situation. Atty. Ray Bulaon has successfully helped thousands of clients in getting out of debt. For a free attorney evaluation of your situation, please call Ray Bulaon Law Offices at TOLL FREE 1 (866) 477-7772.