Removing Protections May Lead to Burst of Foreclosures
When COVID-19 forced businesses big and small to close their doors, many Americans were left without a paycheck and a means to pay their mortgage and other debts. A crucial element of the 2020 Coronavirus Aid, Relief, and Economic Security (CARES) Act was expanding a loan forbearance and foreclosure moratorium on all federally backed mortgages. Of the 7 million homeowners who took advantage of forbearance, about 2 million are still behind on their mortgages and vulnerable to foreclosure.
The forbearance and moratorium were first set to expire March 2021. President Biden extended the date to June 30, but many Americans are still unable to pay their mortgages and question their options.
Like the federal government, many private mortgage servicers offered forbearance and moratorium programs. Those expirations also are fast approaching.
Without taking action, 2 million or more homeowners are at risk of losing their homes.
What Is Mortgage Forbearance?
Forbearance programs allow the homeowner to suspend paying their mortgage for a fixed period of time.Homeowners were initially able to receive 3 to 6 months grace, then were extended up to an additional 12 or 18 months, depending on when the initial forbearance began. New forbearance requests will be considered through June 30.
- Mortgages backed by Fannie Mae or Freddie Mac: If you were in an active forbearance plan as of Feb. 28, 2021, you may request up to two additional three-month extensions.
- Mortgages backed by HUD/FHA , USDA , or VA: If you requested forbearance initially on or before June 30, 2020, you may request up to two additional three-month extensions.
Private mortgage servicers also may continue forbearance programs and moratoriums. For example, Wells Fargo will maintain a foreclosure moratorium until the end of 2021. Check with our specific lender for information.
What Forbearance Isn’t
Forbearance isn’t foreclosure, but it is designed to help avoid foreclosure. It is a pause in making your mortgage payments. The payments skipped during forbearance are not forgiven. Depending on your income and forbearance program, you may be asked to make additional payments each month until the missed payments are repaid, or you might be able to add payments to the end of your original mortgage agreement. Check the details of your program on how the missed payments should be repaid. Keep in mind that if you are not in a forbearance program and you are not paying your monthly mortgage, your lender could report you to credit agencies for missing the payments even during a foreclosure moratorium.
When Will Foreclosures Begin?
Without another extension, foreclosure procedures will begin again July 1. June 30 is the last date for first-time forbearance requests. The reasons you are unable to make your mortgage payment must be related to the pandemic. If you are already in forbearance but not yet able to begin making your mortgage payments, check with your lender prior to June 30. It is possible you could have up to 18 months of forbearance eligibility to get back on your feet.
Types of Foreclosure
Two types of foreclosure, judicial and non-judicial, are used in Texas. As the name suggests, judicial foreclosure involves the judicial system and is necessary if the mortgage agreement does not include a power of sale. A court order is required to foreclose. If the mortgage does contain a power of sale, then the lender is pre-authorized to sell the property to pay off the balance if the homeowner is in default. The foreclosure process can begin when the homeowner is 120 days delinquent on their loan.
Foreclosure Steps in Texas
Texas law requires that the lender send the borrower a notice of default and intent to sell by certified mail. The borrower has 20 days to cure the default before notice of sale can be given. When the 20 days have passed, the lender sends a notice of sale to the borrower. The notice is posted at the courthouse and filed with the county clerk where the property is located. Foreclosure sales are from 10 a.m. to 4 p.m. on the first Tuesday of each month. The property is sold to the high bidder.
Take Proactive Action
You will be best positioned if you reach out to your lender now if you think you will have trouble making your mortgage payments. They can inform you of any programs available through them to continue or begin forbearance.
If you have trouble making payments, you can always contact your lender or servicer and ask for forbearance, a payment plan, or some other arrangement to help you stay in your home. Even if regulations allow your lender to foreclose, lenders and servicers may still be willing to work with you.
If your lender cannot provide any payment relief, contact an attorney about your options to avoid foreclosure.
If you receive a notice of default and intent to sell, you still have options. A short sale, loan modification, or legal injunction are a few of the potential options that could help you avoid foreclosure, which stays on your credit report for seven years. Be wary of potential foreclosure scams. Don’t trust anyone who promises a certain outcome, wants to buy your house, or asks for information like Social Security numbers over the phone.
Our skilled attorney at Campbell Law Firm can evaluate the details of your mortgage situation and provide you with the options available to you. With more than 30 years of experience, our attorney has represented a wide range of clients and has a deep understanding of real estate law in Texas.