Pandemic Mortgage Relief
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Pandemic Mortgage Relief
Mortgage companies appear to be showing signs of inflexibility with forebeared or missed loan payments. Learn about our pandemic mortgage relief options that your family can take advantage of during these trying times.
On March 27, 2020 the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was created to help specific borrowers with federally backed mortgage loans. With respect to federally backed mortgage loans, most commonly known as, “FHA” loans (Federal Housing Administration), the CARES Act provides for a mortgage forbearance in Sections 422(b) of the Act.
A forbearance is a permitted pause only of mortgage payments. The payments are and will be still due and owing and are not excused under the Cares Act itself.
Section 4022 of the CARES Act permits borrowers with FHA loans to seek forbearance for up to 180 days, and such forbearance “shall be extended for an additional period of up to 180 days at the request of the borrower.”
Currently, we are seeing the end of the second 180 day extension and unfortunately Mortgage Companies are not being as flexible with respect to the forbeared or missed mortgage payments, when families need help most. At this time, there is also a foreclosure moratorium on FHA loans which extends through June 30, 2021.
The issue is, if a homeowner has already taken advantages of the forbearance periods offered through the CARES Act and if the missed mortgage payments are not satisfied in full, then the mortgagee (mortgage creditor/company) will be able to proceed with foreclosure when the moratorium expires. This situation is predicted to create a new wave of foreclosures.
Good News!
There are and will be options to handle the forbeared or missed mortgage payments that occurred during the pandemic.
The options will be Mortgage Modification, Bankruptcy, or Foreclosure on the property itself, which are discussed in more detail below.
Mortgage Modification
Modifications were born out of the Great recession and became mainstream in or about 2007. The purpose of a mortgage modification is to alter the terms of a mortgage to make the loan most affordable on a monthly basis for the borrower.
A modification generally involves including any missed or forbeared mortgage payments into a new loan and an extension of the loan terms and interest rate. The ability of a homeowner to be given a mortgage modification depends on a few factors, such as borrower affordability, the terms of the modification itself and equity in the subject real estate.
Today’s real estate market looks very different then in 2007 through 2012 when home inventory was high and home values fell sharply. At this time, demand for housing is at an all-time high and inventory is very low which may provide a lack of economic incentive for mortgage servicers to enter into a mortgage modification.
Sadek Bankruptcy Law Offices has been assisting homeowners with securing advantageous mortgage modifications since the inception of the modification concept. A mortgage modification is a legal process resulting in the filing of a new mortgage and note evidencing such mortgage with the local County Recorder of Deeds.
Accordingly, it is important to have skilled legal help and support through any trial and permanent mortgage modification agreement.
Chapter 13 Bankruptcy
Section 11 USC 362(f) invokes what is known as the “automatic stay” in Bankruptcy. This code section is one of the most powerful tools in all of our legal system. The automatic stay is imputed immediately after a Petition in Bankruptcy is filed.
The automatic stay immediately stops any and all collection efforts against the petitioner or any property they own or otherwise have an equitable interest therein. Meaning, a Chapter 13 is available to stop a foreclosure proceeding or as a resource to repay any missed or forbeared mortgage payments before any legal action is taken against the homeowner(s).
It is wise to file or consider a Chapter 13 before any action is taken on behalf of the mortgage creditor to reduce the mortgage company’s fees and costs associated with a foreclosure. Further, a Chapter 13 Bankruptcy filing often streamlines into a mortgage modification for the homeowner.
The premise of a Chapter 13 is to keep any and all assets that one owns and to repay secured creditors, such as a mortgage debts, over a three (3) to five (5) year period. Further, a Chapter 13 Plan can reduce or eliminate unsecured debts, such as credit cards, personal loans, medical bills, etc., thereby making the mortgage payments easier and of the utmost priority again.
Foreclosure
Due to the current foreclosure moratorium on FHA backed loans, there are people who are delinquent on their homes dating back to 2018 or 2019. Although the moratorium is currently protecting such homeowners, without a generous mortgage modification it may not be financially worthwhile to remain in such a home.
If the accrued mortgage delinquency plus the principal balance of the mortgage exceeds the value of the house, it may be an option to simply walk away from the real estate itself; especially, if the home is no longer desirable and/or in need of costly repairs.
Before considering or taking this route, you should consult with an attorney to obtain advice regarding deficiency actions, possible tax consequences and how to maximize your stay in the subject home.
Work with Our Dedicated and Experienced Bankruptcy Lawyers
Sadek Bankruptcy Law Offices, LLC has a dedicated team of lawyers who help clients achieve the benefits of bankruptcy in Pennsylvania and New Jersey. Our lawyers have over 75 years of combined experience and have filed more than 5,000 successful bankruptcy cases.