by Maurie Backman | Feb. 17, 2021
Homeowners are getting added relief during the pandemic.
Many homeowners have struggled to keep up with their mortgage payments during the pandemic, while some fell behind before the coronavirus outbreak began. Thankfully, protections have been in place for homeowners in this category since late March: foreclosure moratoriums and forbearance. And now, those protections are being extended.
On Feb. 16, President Joe Biden extended a ban on foreclosures for federally-backed mortgages. Originally, the foreclosure moratorium was set to expire on March 31, but now, it will remain in place until June 30. During this time, mortgage lenders cannot move forward with foreclosure proceedings for homeowners who were delinquent on their payments before the pandemic or who became delinquent during it.
The Biden administration also extended the enrollment window to request mortgage forbearance to June 30. With forbearance, mortgage payments are paused and aren't reported as delinquent to any credit bureaus. Normally, mortgage lenders can deny forbearance requests, but now, any homeowner that requests forbearance is entitled to it. What's more, mortgage forbearance was initially capped at 360 days and then extended to 15 months, but now, homeowners can defer payments for an extra six months. That extra extension applies to loans that entered forbearance on or before June 30, 2020.
If you're having a hard time keeping up with your mortgage, you can request forbearance and pause your payments for up to 15 months. You'll need to catch up on your payments once your forbearance period ends, but you won't be required to do so in one lump sum. Rather, you'll generally be given the option to either extend your loan's repayment period or make a higher payment each month until you're all caught up.
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Another thing you should know is that you're allowed to pay your mortgage while your loan is in forbearance. If you're able to make partial payments as your income allows, you'll have less to catch up on once your forbearance period ends.
Be aware that if you don't request mortgage forbearance and you fall behind on your loan, your lender can't initiate foreclosure proceedings thanks to the aforementioned ban. However, you can still be reported as delinquent on your payments to the credit bureaus, which could result in substantial credit score damage. If you're worried you won't manage to keep up with your mortgage payments, put your loan into forbearance and buy yourself protection. Being in forbearance won't count against you from a credit score perspective, so there's little to lose by taking that step.
Meanwhile, if you were behind on your mortgage before the pandemic and don't think you'll manage to catch up, you may want to look at selling your home and moving to a less expensive one. Home values have soared on a national level, so if you were underwater on your mortgage before the pandemic began, you may be able to sell your home for enough money now to pay off your lender in full and walk away clean.
Chances are, interest rates won't stay put at multi-decade lows for much longer. That's why taking action today is crucial, whether you're wanting to refinance and cut your mortgage payment or you're ready to pull the trigger on a new home purchase.
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