Covid mortgage relief programs that allowed millions of homeowners to halt monthly payments are beginning to expire, with many borrowers still unable to pay.
Throughout the pandemic, homeowners took advantage of mortgage forbearance programs that allowed them to pause payments for any reason related to Covid. Some were able to stop payments for up to 18 months.
As of mid-November, over 1 million homeowners still were in Covid-related forbearance plans. In December, around 300,000 of those will reach their final expirations.
While many will be able to resume payments by pushing the missed payments onto the end of their loan schedule, some are still unemployed or lack the funds to repay.
Mortgage experts and housing counselors are encouraging these borrowers to reach out to their mortgage loan officer immediately to discuss their options.
Mortgage lenders are supposed to reach out to their borrowers 30 days prior to forbearance ending to discuss the range of options available to them.
If a borrower has not heard from their lender yet and expiration is approaching — or if they’re unsure when it expires — they should call their lender to discuss next steps.
Homeowners who are unable to resume scheduled loan payments have other options available to them, experts say.
Borrowers may decide to sell their home, modify their loan, refinance, or look into the Homeowner Assistance Fund, which is in the process of providing state-specific assistance.
Since home prices are up nearly 20% from last year, homeowners may decide to sell their homes and gain access to the cash left over from the difference between their property value and remaining mortgage balance.
If selling isn’t an option, borrowers can ask their lender if it’s possible to adjust their loan for more favorable terms. This might include extending the loan term or lowering the interest rate to lower monthly payments.
Borrowers who qualify may be able to refinance their loan, to replace their current mortgage with a new one with more favorable terms. This could provide borrowers the option to use their equity to take needed cash out.
If selling, refinancing, or modifying the loan won’t work, experts recommend borrowers reach out to a housing counselor for specific advice.
Repayment options for forbearance typically include repaying a portion of the owed amount each month, moving missed payments to the end of the loan term, or paying the total owed amount in a lump sum.
Experts are confident most borrowers will be able to find a solution with their mortgage lender. They caution that reaching out sooner rather than later is best, because the options for borrowers may dwindle the closer they get to their expiration date.
Our advise is based on experience in the mortgage industry and we are dedicated to helping you achieve your goal of owning a home. We may receive compensation from partner banks when you view mortgage rates listed on our website.