The federal CARES Act provided mortgage-payment relief for millions of American home owners experiencing pandemic-induced financial hardship. It was truly a lifeline for these many homeowners who wouldn’t have been able to keep up with mortgage payments. But the one-year end date for many of the forbearance plans is fast approaching – and it will have profound implications for home owners, as well as home buyers and sellers. Read on to find out what to expect after the end of the foreclosure forbearance program in Kauai.
Overview of What Happens At End of Foreclosure Forbearance
Many homeowners who took advantage of the foreclosure forbearance program in Kauai will be coming out of forbearance in 2021 – and then repayment will begin for them.“Homeowners who entered mortgage forbearance under the federal relief efforts are limited to anywhere from 12 to 18 months of payment deferral, depending on when they started their forbearance period and what type of home loan they have.”
If you’re among these homeowners, here are the possibilities you’ll be looking at with respect to repayment:
- Repaying “past due mortgage payments within 6-12 months of the forbearance period ending (six months for federally-backed mortgage loans and 12for Fannie Mae or Freddie Mac loans)”
- Extending the mortgage and adding the excused payment to the back end of the loan
- Extending “the mortgage term to 30 years (or 40 for Fannie Mae and FreddieMac loans) and recalculate the monthly mortgage payment to be the same as or lower than it was before forbearance”
You need to keep in mind that the foreclosure forbearance program in Kauai was/is not loan forgiveness. You will still have to pay the principal and interest you didn’t have to pay during the forbearance term. You’ll also have to keep making your regular mortgage payments.
Repayment options include the following:
- A one-time, lump-sum payment – This is simply a possibility – lenders cannot require it.
- Intermittent payments – “[Y]ou arrange repayment with your servicer over three, six, nine, or 12 months – whichever makes the most sense – on top of your regular payments.
- Lengthened loan term – In this arrangement you “pay off the missed amount at the end of the extended loan term, with additional mortgage payments.”
- Payment deferral – This will allow you to “pay off the missed amount when[your] home is sold, refinanced, or at the end of the loan term.”(Be sure to consult your Kauai agent at 808-634-4518 if selling is on the horizon for you.)
- Loan modification – If you are at risk of default, you may want to modify the loan to get a lower interest rate or reduced monthly payments.
Foreclosure Forbearance Extensions
A better option for many people still struggling financially is a foreclosure forbearance extension. “Recent changes by Fannie Mae, Freddie Mac, and the federal government have given homeowners additional opportunities to extend their forbearance plans.”
With a conventional loan, you can request “one additional 3-month extension, for 15 months total loan forbearance. To be eligible, you need to have been in a COVID-19 forbearance plan prior to February 28, 2021.” For government-backed loans such as FHA, VA, and USDA loans, you “can request two additional 3-month extensions, for up to 18 months total forbearance. To be eligible, you need to have been in a forbearance plan prior to June 30, 2020.”
Keep in mind the final decision on whether you get an extension lies with your lender/servicer. And remember, too, that extensions are not automatic – you have to apply for them.
More Things to Expect and Consider
And here are a few more things to expect after the end of the foreclosure forbearance program in Kauai . . .
- You’ll likely experience long delays, inconsistency, and snags when you contact your loan servicer and commence the process of implementing the option of your choice. Staffing will likely be insufficient to meet volume needs.
- You should monitor your credit score. Payments missed during forbearance shouldn’t ding your credit, but mistakes happen and errors creep in. So check your credit report.
- You can end your forbearance plan and resume payments any time you want – you don’t have to wait till the six- or 12-month period ends.
- You can also refinance after you exit forbearance, which could be a wise move for many.
When You Can’t Resume Payments
It may turn out, though, that you simply can’t repay the missed payments and resume regular payments with of the available options after the end of foreclosure forbearance. In that case, your best course may be to sell your home.
If you find yourself in this boat, according to financial and real estate experts, “[y]ou’ll probably need to consider disposition options . . . This may include selling your home if you can no longer afford it. Foreclosure, short sale, and deed-in-lieu are other ways of disposing of a home you can’t afford.”
Your Local Agent and Foreclosure Forbearance
Unfortunately, with the state of the economy, many homeowners will have to take the option described above – selling or some other disposition – after the end of their foreclosure forbearance. This means people needing to sell quickly and buyers who want to take advantage of the opportunities. Wherever you stand, you’ll fare better by using an experienced Kauai agent. So if the end of your Kauai foreclosure forbearance is looming, contact us today at 808-634-4518.