COVID-19 crisis has led to many people losing their jobs worldwide, not just in Wisconsin. This has been especially dangerous for people facing foreclosure on their Milwaukee property. Luckily, there is a forbearance program that can help you get mortgage relief during the Coronavirus pandemic.
When you are a homeowner, the last think you’d want is a foreclosure on your property. A foreclosure happens when you miss several mortgage payments – usually four or more, but that depends on your state and your lender. If you are experiencing a short-term hardship, such as one that is caused by the current crisis, you may be eligible to a forbearance program.
What is Forbearance?
In the words of Investopedia, forbearance is a temporary postponement of mortgage payments. It can be granted to a homeowner facing foreclosure as a form of repayment relief. In other words, forbearance will provide you with the additional time to repay delinquent mortgage payments. The forbearance program is beneficial not just for the homeowner, but also for the lender, as they are losing money as well during the foreclosure process.
The only downside to all of this is that the loan services, which collect payments but don’t own the loans, might not be willing to work with homeowners on forbearance relief as they don’t come with too much financial risk.
Are You Eligible for Forbearance?
There is no guarantee that you will be given a forbearance just because you are late on the payments. In order to be awarded forbearance in ‘normal’ occasions, you should contact the lender, explain the situation and hope for approval. How do you know if you have the chance for forbearance program?
First off, you must provide the lender with the reason why you are temporarily unavailable to make your payments on time, such as financial difficulties caused by divorce, major illness, or, in this case, COVID-19 pandemic. If you were making your payments on time before this, you are more likely to be eligible. The same goes for homeowners who have had steady income flow for the past several years or, in case you have lost your job recently, if you have the skills that can help you land a new job quickly. Homeowners who were often late for payments, who can’t hold on to job for more than a year and who have proven to be irresponsible will have smaller chances of being granted any form of forbearance program.
In all instances, the homeowner and the lender will negotiate the terms of the forbearance process. The conditions of the agreement will most likely depend on your ability to resume monthly mortgage payments once the temporary forbearance program is over. The homeowner may get a full reduction of payment or a partial one.
In some cases, such as during the Coronavirus crisis, the homeowner will be granted a complete moratorium on making mortgage payments for a certain period of time. On some other occasions, the homeowner will have to make interest payments but not pay down the principal. The temporary lower interest rate may also be granted. The homeowner and the lender need to have a long discussion to make sure what the best solution is so both sides can be satisfied.
Forbearance Process during the COVID-19 Crisis
A new federal law, the Coronavirus AID, Relief and Economic Security (CARES) Act, gives homeowners with federally backed mortgages two protection options. The first is the complete moratorium on foreclosure processes that will last for 60 stays, starting March 18th 2020. The other one is the right to request a forbearance for up to 180 days, with the possibility to extend it for another 180 days. If you request this forbearance, you will get no additional fees, penalties or additional interests added to your account, and you don’t have to provide any additional documentation. It’s enough to claim that you are experiencing a pandemic-related financial struggle.
The terms of this special forbearance program once again depend on your lender. For example, if you have a loan made with Fannie Mae, Freddie Mac, VA, FHA or USDA loan, you don’t have to make any payments until the moratorium is lifted – unless, of course, if you want to and are able to.
How will you return the money you owed is completely up to you and your lender. You may return the money all at once, spread it out over a period of months, or even have it as additional payments at the end of your mortgage.
How to Prevent Foreclosure if You Don’t Have a Federally Backed Loan?
When you don’t have a federally backed loan, it is up to your lender to decide whether or not you are eligible for forbearance process or any other mortgage relief option. If you don’t want to risk it, you can always opt to sell your house to prevent foreclosure. And yes, you can sell your house that you still owe on, even during the COVID-19 pandemic. We at Sparks Property Investors LLC will buy your house in cash to help you get out of your debt. We buy properties as-is, so you won’t have any additional expenses on repairs, inspections and additional maintenance. The best part? We will let you choose the closing date, so you don’t have to worry about finding a new place to stay. We understand that the times are hard in Milwaukee, Wisconsin and we want to help you as much as we can.