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Struggling To Pay Your Mortgage during the Corona Virus?

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Do You Qualify For Mortgage Forbearance?

There are homeowners all over the nation, including right here in Niwot and Boulder County, worried about how they’re going to make their next mortgage payment.

The corona lockdown has shut down the economy, created record unemployment and put millions of homeowners at risk of defaulting on their mortgage.

Your friends and neighbors won’t talk about it, but people you know are in deep trouble and worried about the future. I’m talking about a family member who got laid off, your favorite local restaurant owner and just about any local retail business.

Foreclosure is a dark, ominous cloud hanging unspoken in the air.

There is some instant relief available, but it is temporary and only buys a little time.

On the Federal level, the CARES Act was passed in March to allow homeowners impacted by the corona virus to put off their mortgage payments for a period of time.

The Act provides for an effective initial forbearance period of 90-days (30 days late plus 60 days), that can be extended by agreement to six months and extended again for a total of one year.

The relief comes in the form of a forbearance. It is not a loan modification (where payments are added onto the end of the mortgage) or a forgiveness of debt. A forbearance allows you to put off your payments for a period of time but requires you to catch up all past due payments at the end of that time.

As an example, let’s say you accept forbearance for three months, then you will need to catch up all past due payments in the fourth month. If your mortgage is $2,000 per month, you can skip three payments and then pay $8,000 in the fourth month.

The obvious question is how many people, who can’t afford one payment, will be able to make four payments a few months later?

The Act does allow for the set-up of an additional repayment plan and even a loan modification. This needs to be separately negotiated and agreed with your lender. It is not automatic so speak to your lender ASAP.

The federal relief is only available to “federally backed mortgages”. Around 70% of all mortgages are federally backed mortgages and are purchased or guaranteed by Fannie Mae, Freddie Mac or the VA.

If you do not have a federally backed mortgage, then you do not automatically qualify for the forbearance relief. Fortunately, many non-federally backed lenders have voluntarily adopted the same guidelines.

You can look up your loan on the Fannie Mae website at https://www.knowyouroptions.com/loanlookup

The best way to find out if your mortgage is federally backed is to call your mortgage lender. This will start the conversation with your lender and also let you find out if there are any additional options and programs.

The Cares Act provides the same relief to investors who own rental properties (1 to 4-unit buildings). There are different rules for multi-family investors.

Two important measures in the CARES Act provide that you will not be charged late fees and your credit will not be negatively impacted if you qualify and apply for forbearance relief.

Remember that this only covers federally backed loans and you must contact your lender and request relief.

This covers forbearance under the CARES Act.

It may not be covered if you negotiate and agree on an additional loan modification or repayment plan. If you enter into a loan modification or repayment plan, make sure you discuss fees, interest rates and the impact on your credit.

Additional State Relief

The state of Colorado doesn’t have any additional financial relief for homeowners.

There is some indirect relief as there is a moratorium on most civil legal action. Under the lockdown, the courts are closed to all but urgent civil and criminal cases and are not proceeding with most civil cases. Even if your lender intends to foreclose on you, it will be a slow and delayed process as we wait for the courts to reopen and address a huge case backload.

Summary of What To Do Get Mortgage Forbearance Relief

You can look up your loan on the Fannie Mae website at https://www.knowyouroptions.com/loanlookup

  • Contact your lender and discuss relief options
  • Do not simply skip a payment without contacting your lender
  • Reach written agreement with your lender if you seek addition loan modification or repayment plan relief
  • Speak to local homeowner and foreclosure counselors.

Additional Resources: Go to www.FannieMae.com and the Colorado Foreclosure Hotline (call 1-877-601-HOPE) – http://www.coloradohousingconnects.org/foreclosure-prevention.html

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Ross Hair

Ross Hair is a real estate agent and the Broker / Owner of Boco Realty LLC.