The coronavirus pandemic has brought with it serious financial trouble for many individuals. From being furloughed to facing reduced hours or pay cuts, it’s left many Americans struggling to pay their monthly bills.
The federal government recognized that these financial struggles could lead to large numbers of foreclosures. So part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act included regulations for lenders to hold off on foreclosures for several months while people get back on their feet financially.
However, those mortgage payments will still come due at some point. Before you sign a forbearance agreement to delay mortgage payments, you should learn more about what it means and how it will work.
About Mortgage Forbearance Agreements
While the CARES Act set forth requirements for lenders to not foreclose on homes, it didn’t dictate the terms of forbearance agreements for individuals struggling to pay their mortgage. These agreements can vary based on how long you have to repay the missed payments.
The important thing to know about signing a mortgage forbearance agreement is that you must repay those missed payments within a specific period. For example, if you avoid payments or make reduced payments for three months, some forbearance agreements require you to pay back that money owed in addition to your current monthly payment once your agreement expires.
The lender will stretch out those missed payments over several months. These payments will include the principal, interest, taxes and insurance. So while you’re getting financial relief during the agreement period, be ready for larger payments once the agreement ends.
Other forbearance agreements can take all the money you owe from missing payments and make it due when you pay off your loan, known as a balloon payment. If your lender is offering this option it is important to verify, in writing, that they are not charging you interest on the missed payment amount.
Under the CARES Act, you can enter into a forbearance agreement for up to 12 months. At the end of your original agreement, you also might be able to extend your agreement, based on your circumstances. During this time, lenders are also not permitted to share your past-due reports with credit bureaus to protect your financial health.
Entering Into a Forbearance Agreement
It is essential that you get a forbearance agreement in writing. Then, take your time to review the agreement in detail to ensure you understand what you’re agreeing to. Review what your monthly payments will look like at the end of the agreement to make sure you’re comfortable with the terms.
If possible, it’s a good idea to try to move forward with partial payments so that the financial burden on you at the end of your forbearance agreement is not enormous. However, every person’s financial ability to continue making payments will be different; so, evaluate what you can pay and discuss it with your lender.
At the end of your agreement, you might be able to discuss an extension with your lender if your financial situation is unchanged. One enormously challenging part of the pandemic is that it’s unclear how long it will last and how well the economy will bounce back.
Entering Into a Forbearance Agreement
It is essential that you get a forbearance agreement in writing. Then, take your time to review the agreement in detail to ensure you understand what you’re agreeing to. Review what your monthly payments will look like at the end of the agreement to make sure you’re comfortable with the terms.
If possible, it’s a good idea to try to move forward with partial payments so that the financial burden on you at the end of your forbearance agreement is not enormous. However, every person’s financial ability to continue making payments will be different; so, evaluate what you can pay and discuss it with your lender.
At the end of your agreement, you might be able to discuss an extension with your lender if your financial situation is unchanged. One enormously challenging part of the pandemic is that it’s unclear how long it will last and how well the economy will bounce back.
Know When Your Lender Can Foreclose on Your Home
As you review your forbearance agreement, be sure that you know when your lender can foreclose on your home. Have regular discussions with your lender so you don’t experience any surprises and ask often what your options are.
A final step before foreclosing on your home should be for the lender to review your loan terms and consider updates. Lenders have the option to delay missed payments to the end of the loan term so as not to increase your monthly payments. They can also adjust the interest rate to help make your loan affordable.
Legal Assistance for Illinois Foreclosures
If you’ve done all you can in negotiating with your lender and still receive a foreclosure notice, take a deep breath. You can fight a foreclosure notice through legal defense.
The team at Adam Diamond Law can work with you to assert your rights and get you time to try to work things out with your lender. Contact us now to begin your foreclosure defense.
DISCLAIMER: The information contained herein is solely for informational purposes. While it is important that you educate yourself, nothing herein should be construed as legal advice or create an attorney-client relationship. For specific questions, we always urge you to contact a local attorney for advice pertaining to your specific legal needs.
