Foreclosure has taken on a whole new meaning this past year. Yes, your home may be in foreclosure or approaching foreclosure because of job loss impacting your financial situation, but you could also apply for forbearance, temporarily suspending your mortgage payments and stopping the foreclosure process. Now that the initial 360-day program for government-backed mortgages is over, there have been extensions to the program and more are being proposed.
As of now, the government has extended the moratorium through June. Also, the Consumer Financial Protection Bureau in the early part of April proposed a rule that would prohibit foreclosures through December. They also want to give servicers of the mortgages options to help streamline loan modifications with COVID-related hardships, as well as keeping borrowers informed of their options. The question is: Do moratoriums and extensions really help, or as we start to dig out of COVID and people return to work, are these programs just delaying the inevitable for homeowners and distorting the housing market?
That said, there are millions of homeowners who have benefited from the extension programs and have sought mortgage payment relief or forbearance. According to the data from Black Knight, as of March 2021, approximately 2.6 million homeowners remain in an active forbearance plan. For those and others, the Consumer Financial Protection Bureau (CFPB) has information on its website to help homeowners determine and understand their options.
Some of the options available to homeowners who are ready to begin making their monthly mortgage payments again are:
- Reinstatement, which allows homeowners to pay any missing amounts all at once.
- A repayment plan, enabling homeowners to resume making their regular monthly mortgage payment plus an additional portion of the missed amount each month until the missed payments are paid off. Don’t forget that these suspensions were only temporary – the missed mortgage payments still need to be repaid.
- Payment deferral, for those who are unable to reinstate or who can’t afford a repayment plan but can resume their monthly mortgage payments. This defers any missed payments to the end of the loan term when it is paid off. Interest is not charged on the deferred amounts and is due upon sale of the property.
- Loan modification, to change the original loan terms, like the interest rate or term of the loan, to permanently change the mortgage and make a homeowner’s monthly mortgage payment more manageable moving forward.
As always, my concern is the overall housing market. Although all of these programs have helped millions of homeowners, I question how they impacted the shortage of homes on the market we’re experiencing now, pushing values up to an unaffordable level for the next generation of buyers. Are homeowners not selling because they have no incentive while they aren’t paying their monthly mortgage in homes they will probably have to eventually sell anyway? With the jobless rate down to 6% from a high of 14.8% and employers having difficulty hiring new staff, in my opinion, it’s time to get the housing market back to normal.
In addition to homeowners, renters have received a fair amount of benefit from the original Cares Act with a 120-day moratorium on evictions, which has also been extended through June. However, homeowners who are also investors and landlords are having big financial issues keeping up with their expenses.
As we in Florida experience a blow-out real estate market, please remember that many homeowners around the country are still finding a way to dig out. The federal government has offered substantial help in this area and now it’s time for homeowners to remember the real meaning of foreclosure. Stay well.
