What happens next?
From the point of view of a service provider, the ideal result would be for you to give the company a check for the missing payments after the deferral period has expired. This is unusual, especially if you owe 18 months worth of mortgage payments.
Typically, servicers offer a variety of repayment options based on your solvency. They are in the credit servicing business rather than foreclosure management and usually want to work with you. Here are the common options a lender can offer:
- Repayment schedule The servicer will ask if you can repay the amount you forgot you missed in three to 12 months.
- Back end payment The servicer will ask if you can still make your mortgage payment. If so, the servicer will peg the payments to the end of your loan as a lump sum, usually without interest. Eventually, you can refinance the mortgage or sell the home and pay back your principal as well as the balance that was abandoned.
- Extended payments If you can make payments like you did before the global health crisis began, the lender may offer to extend your mortgage. This would mean additional interest and a longer payback period, but as with postpay, you could also refinance your loan or repay the remaining balance when the house is sold.
A fourth option would be for the lender to offer a new 40 year mortgage, which would reduce the size of your monthly payments. The maximum term of a typical mortgage is 30 years. Some lenders offer mortgages as early as 40 years, but they are uncommon. A 40 year mortgage would increase the interest you pay over the life of the loan. If you had a $ 250,000 30-year mortgage at 3.125 percent interest and refinanced into a 40-year bond at the same rate, you would pay an additional $ 52,700 in interest over time.
If your grace period ends and you just can’t get any of these solutions to work, you probably have to sell your apartment. On the positive side, the strong housing market has given property values a boost. The S&P Case-Schiller US National Home Price Index is up 16.6 percent in the past 12 months, and even if you’ve been in your home for a short time, you can get enough from the sale to make a profit.
If you can’t sell the loan for the amount you owe, you may be able to give the lender a so-called deed instead of foreclosure – in other words, you give the house back to the steward to pay off the debt. Usually the property manager requires the house to be in good condition and swept clean; some even offer up to $ 3,000 in moving costs. You may also be able to do a short sale, where you sell your home in the open market at a price that is less than what you owe but is acceptable to the manager.
If you are there financial distress, talk to your loan service provider about your options. You can potentially find a amicable way to avoid foreclosure and eviction – worst case scenario. Reply to any notifications you receive over the phone or in writing. Coming out of Forbearance can be a challenge, but don’t make it harder by ignoring the realities.