A trend has developed recently in which mortgage lenders offer a forbearance to it’s borrows allowing them to miss a few monthly mortgage payments. The idea is that, due to Covid 19, this will allow a reprieve for a few months from making the mortgage payment and allow those that have had their income reduced some breathing room.
So, on the surface, this sounds like a compassionate, well-timed, response by mortgage companies to assist the borrowers. However, there is a catch.
Once the forbearance period is over, lenders expect immediate, full payment of all of the missed payments. For example, if the mortgage company gave a forbearance of 3 months for a mortgage payment of $1000 per month, in month four, the mortgage company would expect a payment of $4000.
This has become quite the problem for many people that were expecting some relief. Whether this is not explained well, the explanation is being ignored, the result is the same. Many people taking advantage of a mortgage forbearance are finding themselves behind on their mortgage. The relief that was anticipated, turns into a delinquent mortgage payment with the threat of foreclosure looming.
The best way to address this potential problem is to avoid it. Ignore the offer for a forbearance or at least set aside the regular mortgage payment each month. However, if you’ve already fallen prey to a forbearance, and are now facing the prospect of 4 payments due at once, you have limited options if you want to keep your home. You can get the necessary funds together to bring the loan current; you can seek a loan modification; or, you could consider a Chapter 13 bankruptcy.
So, while a forbearance offer seems to offer some short term relief, it can very easily turn into a long term problem. Please feel free to contact W M Law with questions at 913-422-0909. We have four offices, Kansas: Olathe and Lawrence, Missouri: Independence and Northland.