The economic downturn from the coronavirus pandemic has forced many home and business owners into foreclosure. The federal government has instituted emergency mortgage relief measures, however. How can you use these regulations to avoid foreclosure during the era of COVID-19, and what lessons can you learn from previous foreclosures?
Lesson 1: Forbearance Might Help You Avoid Foreclosure
Under the CARES Act, federally and GSE (Government Sponsored Enterprise) backed mortgages became eligible for forbearance. Homeowners are allowed to pay their mortgage at a reduced rate or suspend it entirely for up to six months, and can file for a six-month extension. Most mortgage lenders will also agree not to initiate foreclosure during the forbearance period. As of August 2020, the Mortgage Bankers Association estimated that 3.7 million homeowners were in forbearance.
Unlike a loan modification, forbearance is meant as a temporary solution. You're expected to resume your normal payments after the forbearance period ends, as well as make up for reduced or missed payments. Given the special circumstances with the pandemic, you might, however, be able to secure a loan modification at the end of your forbearance period.
Lesson 2: You Might Not be Foreclosed on Until the End of 2020
If you have a federally or GSE backed loan, the CARES Act may also prevent your lender or loan servicer from foreclosing on you until December 31, 2020. Some states are also preventing lenders from evicting people even if the foreclosure proceedings do start. Another thing to keep in mind about foreclosure is that your loan servicer generally cannot begin foreclosure until your loan is more than 120 days past due, under federal law.
Lesson 3: Avoid COVID-19 Foreclosure Fraud
A final lesson for avoiding foreclosure during the pandemic is watching for COVID-19 foreclosure prevention fraud. A known scam involves fraudsters contacting consumers by phone, pretending to be their loan servicer, and offering financial relief. Many people are struggling right now, so they consider the call as a lifeline and consent to give their personal information without verifying who's on the other end of the call. Keep an eye out for this scam and always contact your loan servicer directly if you have questions about your mortgage.
If you have any questions about foreclosure or loan modification, we can help. Contact a New York real estate attorney at Monachan Law today to learn about your options.