Susan Myers, Georgia REALTOR
The Covid-19 pandemic has wreaked havoc on our economy causing millions to lose their jobs or close their businesses only to fall on hard times. Many have depleted their
savings and 401(k)s to stay afloat. According to the Labor Department, over 20 million people are receiving unemployment benefits. These job losses and closed businesses,
caused by the Covid-19 pandemic, have resulted in widespread concerns for homeowners and renters fearing foreclosure or eviction from their homes because they
can no longer pay their mortgage or rent.
On September 4, 2020, the CDC announced an order that temporarily halted residential evictions, and this order expired on December 31, 2020. This order does not reduce
the amount owed for missed payments, late fees, penalties, or interests. If you owe it you are obligated to pay it, eventually. Several states are working with lawmakers to
extend the renter moratorium to July 1, 2021. However, if this moratorium is extended, renters should be prepared to pay for all the months missed when the moratorium
There’s also help for homeowners who have fallen behind on their mortgage payments. To start, be sure to speak with your mortgage holder to inform them of your temporary
financial hardship. Don’t wait until you’re a month, or more, behind before calling your mortgage holder, call them as soon as you know you’re not going to be able to make a
mortgage payment. This is the time to ask your mortgage holder about a mortgage forbearance which will cause less damage to your credit than a foreclosure. And, more
importantly, a forbearance will allow you to remain in your home. Mortgage forbearance is an agreement with the mortgage holder and can be used when a homeowner has fallen on hard times and isn’t able to make their mortgage payments. A forbearance can last for one month, several months, or even as much as one year. It depends on your situation and what your mortgage holder will allow. Keep in mind, you will have to make up the missing payments, at some point, after the forbearance.
There are two most common repayment options for a forbearance, and they are increased payments or extending the mortgage term. Should the mortgage holder choose an increased monthly payment they will determine the amount and will then add that amount to your regular monthly payment. The increased payments will continue until all the missing payments have been paid. The second option is to add the missed payments to the term of your mortgage. Again, this is something you should discuss with your mortgage holder before signing the agreement to ensure you know what’s going to happen once the forbearance period has ended.
Like most things in life, there are pros and cons with a mortgage forbearance. First, let’s look at the pros:
• a forbearance will have less of a negative impact on your credit than missed payments or a foreclosure;
• it gives you time to address your temporary financial hardship; and,
• avoid foreclosure and remain in your home.
Now, let’s take a look at the cons of a mortgage forbearance:
• you must qualify for a forbearance;
• your mortgage holder may increase your mortgage payment after the forbearance to make up the missed payments;
• you won’t benefit from the forbearance if you are having frequent challenges paying your mortgage;
• the missed payments will continue to accrue, and you are required to pay them; and,
• oftentimes, when using a government mortgage relief program there will be a negative impact on your credit and your ability to possibly purchase or refinance in the future.
It is up to your mortgage holder to determine the terms of your forbearance. Make sure you request everything in writing and read it thoroughly to ensure you understand the
terms before you sign the agreement. To learn what’s best for your situation, contact your mortgage holder to discuss your options and what they are willing to approve for your temporary financial hardship. Remember, banks are not in the business to own real estate. They will be more than happy to help you keep your home.