A forbearance of payments on your mortgage may or may not be right for you. Here is a breakdown of the hidden pitfalls and opportunities built in that you need to understand before making this decision.
FHA Back Mortgage Loans and Forbearance
Postponing or reducing loan payments while interest continues to accrue is a forbearance. FHA-backed mortgage loans may be put under forbearance as a result of the CARES Act. You can look yours up here to see if your mortgage is still FHA backed.
Are non-FHA mortgages eligible for forbearance?
Mortgage servicers operating in New Jersey offer forbearance as a result of negotiations with Governor Murphy.
Forbearance is not a modification. At the end of a forbearance period, all the money not paid back to that point through the forbearance period is still owed. Virtually no one taking the forbearance will be able to make up those payments all at once.
Will taking forbearance cause default and foreclosure?
Almost certainly not.
The mortgage servicing industry is going to tell you otherwise because the industry is in terrible straits. A mortgage servicer must make payments every month to the owners of the mortgage loans that they service. They can’t collect on the monthly payments from those people taking the forbearance (or simply refusing to pay for other reasons).
The notifications you are going to receive are all going to warn you of the dire consequences coming at the end of the forbearance period.
But they are not telling you the truth.
Modifications Available for FHA-Backed Mortgages
If you have a reasonable income sufficient to cover the monthly payment, a modification of an FHA mortgage is nearly assured.
We can help you with the loan modification process to ensure your chances of getting a fair deal, as the law protects your right to file a modification application and have it reviewed.
About Modifications for Non-FHA Mortgages
Non-FHA mortgages may not have a modification process in place, at least as of this writing. Ideally, loan servicers would be proactive in trying to help you now rather than wait and see what the government does for them. In 2008, mortgage servicers automatically foreclosed on homes after 3 months of non-payments and a default on the loan, whether there was a loan modification worked on or not.
Dual-tracking is No Longer Allowed
This practice, known as dual-tracking, is no longer allowed. We have experience with this mortgage servicing violation. We have successfully sued the mortgage servicer for damages for this violation. In some cases, this action also got the homeowner the loan modification.
We Anticipate Servicing Errors on Loan Files
There is one other scenario coming up that is frightening the mortgage servicers. We’ve looked at literally thousands of loan files where stopped, missed, or changes in payments caused servicing errors. The probability of a servicing error increases with changes in handling the file. A mortgage servicer’s uncorrected servicing errors can result in a lawsuit unrelated to default.
File a Request for Information
A loan must be 100% correct when reinstated and payments resumed, or the loan servicer can be sued. We aren’t guaranteeing that this will happen. It is logical to assume that there will be a percentage of files where this will happen.
With a Request For Information, check loans coming out of forbearance for irregularities. You can do this yourself, or we will help you at no charge.
More Resources to Prevent Foreclosure
Our Foreclosure Guide will help educate you as to the process and ease concerns. You can contact our foreclosure attorneys for assistance.
Federal Housing Finance Agency Coronavirus Assistance Information
