After the foreclosure moratorium ends, you will once again be responsible for your monthly mortgage payments, as well as the payments that you missed — along with the potential late fees and compounded interest payments you incurred over the past two years. If you continue missing payments, you will be at risk of facing foreclosure. The best thing you can do to prepare is reach out to your lender and talk about what they are planning and what you can do to help get back on top of your payments. Luckily, there are a few things you can do to help ease into conquering these payments. Keep reading to see what you can expect in the coming months.
In March of 2020, the world was bombarded with the onset of one of the largest global pandemics in recent decades. In response, many governments enacted policies aimed at both keeping its citizens safe, and keeping them in their own homes despite an uptick in nationwide shutdowns and job loss. Americans had many protections, including eviction bans and foreclosure moratoriums. These policies were built to help keep Americans in their homes, even if they had lost their job due to the pandemic.
Now, as the world is seeming to largely come out of quarantine, many Americans are filled with anxiety as these protections are coming to an end. This article will try to help answer any questions you may have about the ending of the foreclosure moratorium, as well as let you know about any other help you can expect.
What Was The Foreclosure Moratorium?
In the early stages of the pandemic, a foreclosure moratorium was put into place. Basically, the moratorium temporarily stopped lenders from being able to pursue foreclosure on the homes of borrowers who had missed payments on their mortgages.
The moratorium also included other protections, allowing borrowers to ask for forbearance in response to Covid-19 related hardships. A forbearance is an agreement between a lender and a borrower that allows for the deferment of payments, or payments made in smaller amounts. Typically, a lender is not forced to grant forbearance, however, in the midst of the pandemic, federally-backed loans were required to grant forbearances requested. Many private-backed loans followed suit and granted borrowers forbearances if requested.
It’s very important to note that the moratorium did not cancel out any mortgage payments owed during the pandemic. Rather, it simply meant that lenders could not pursue foreclosure for missed payments.
Why Is The Foreclosure Moratorium Ending?
At this point in time, the United States has largely opened back up after shutting down for a period of a few months. Because of this, a lot of the economic impact has been reversed. People have gone back to their jobs, they are back in their offices, and are able to continue making an income. The moratorium was extended multiple times to ensure that it didn’t end while individuals were still forced to stay home without a job. With the influx of multiple vaccines and boosters, many employers are now reinstating jobs that were let go at the beginning of the pandemic. In response, it was seen that the moratorium no longer needed to be extended. Basically, the need for the moratorium has ended, and extending it, at this point, has the potential to do more harm than good. Because of this, the moratorium officially ended September 30th, 2021.
Will I Immediately Lose My Home After The Moratorium Ends?
If you are like so many Americans during the pandemic that couldn’t make your mortgage payments, you may be worried about the impact the moratorium lifting may have. Rest assured, the moratorium ending does not automatically mean you are going to immediately lose your home. In fact, there may not be much of an incentive for your lender to immediately seek foreclosure.
If you are worried about how your lender will move forward once the moratorium protection ceases, you should reach out to them and see what they are thinking. If you haven’t yet asked for a forbearance, consider doing so now. Though the moratorium is over, a lot of lenders are still considering the ramifications of Covid-19, and are granting forbearances to help families get back on their feet. Even if you have already exceeded the amount of time you are allowed to have forbearance, there are other options you could consider that would prevent foreclosure. We will cover those options in a minute.
The big thing to know is that, even though the moratorium allowed you to miss your mortgage payments without the threat of foreclosure, that doesn’t mean there was no consequence. You are still accountable for the missed payments, and it’s likely that you also now have late payments, along with higher interest payments due. Talking to your lender can help you figure out exactly what you owe — and sometimes, lenders may even forgive the late fees if you explain your situation. In short, the best thing you can do at the end of this moratorium is talk to your lender to see what options are available to you.
Will There Be Any Other Kind Of Foreclosure Relief With Covid-19?
Luckily, the federal government, along with varying state governments, are helping Americans recover from the economic hardships of the pandemic with other plans to help with mortgage payments. These plans change from state to state, so be sure to look up what your state is offering homeowners. These plans range from grants that will allocate money to help you pay off what you owe, to protection from your lender that requires them to work with you to figure out a payment plan.
What Can I Do If I Still Can’t Make My Mortgage Payments?
As the moratorium ends, you may be looking around wondering how you are going to get back on top of what you owe. Remember, just because the moratorium protected you from being foreclosed on, doesn’t mean you aren’t accountable for the missed payments. If you are looking at what you owe, along with the compounded interest and late fees, and feel overwhelmed, don’t worry too much! There are still things you can do to help prevent foreclosure and get back on top of your payments. Most of these options include one key factor: communicating with your lender. At this point, your lender is probably aware that you are in a financially precarious situation, however, talking to them and trying to learn more about your options is the best way to show that you are making an attempt at repaying what you owe.
Once the moratorium ends, legally speaking, your lender has the right to begin filing for foreclosure. This doesn’t necessarily mean they will, it just means that they can. Talking to your lender and trying to figure out a way to work together will, at the very least, show that you are working towards restitution and may make your lender more willing to work with you. Here are some of the options you may want to consider:
Talk to your lender and see if there is a possibility that they would accept a loan modification. A loan modification just means the details of your loan repayment could change. This may look like extending the time you have to repay your loan, or altering how or when you make payments.
This option requires a lot of money upfront, but it can put you back in good graces almost immediately. If you have a lump sum of cash saved up, paying off every missed payment, late fee, and interest payment that you accumulated will ‘reinstate your loan’ meaning you can continue on as if you never missed a payment. Lenders are typically eager to accept this option if it is available to you.
If you missed a few of your payments over the course of the pandemic, but you are still generally able to make your monthly mortgage payments, it may be worth the effort to see if your lender would consider an altered repayment plan. This may look like adding those missed payments to the end of your loan or divvying up the missed payments over the course of a few months, rather than all at once.
If you purchased your home at a time when interest rates were through the roof, it may be a good time to look at refinancing. Refinancing can lower your interest payment, thereby lowering the total amount you owe each month. You typically also move your loan to a third party, which means you could restart with a relatively clean slate.
I know this may be a difficult option to consider, but think about whether or not you truly need this house. Is it more of an expendable luxury? If so, consider selling the house. Not only could you potentially get out of debt, but there is also a possibility of making money on the property. This could either set you up to purchase a smaller home or rent a nice home or apartment. Consider your options and see if selling your home might be the smartest move.
Do you have debt piling up all around you? If your mortgage is just one of the many areas you are financially worried about, maybe bankruptcy is a move to consider. If you are considering filing for bankruptcy, especially in hopes of stopping a foreclosure, make sure you consult legal help. Bankruptcy can be tricky, and if you go about it wrong, you could end up ensuring your house is sold to pay off your debts. Make sure you work with someone who fully understands your situation before filing for bankruptcy.
The pandemic was a stressful and overwhelming time for millions of Americans. Now, coming out of the pandemic seems just as worrisome. Don’t let the fear of foreclosure keep you from understanding what options are available to you. Reach out to your lender and see how they can help you get back on top of your mortgage payments.