HELPING AT-RISK HOMEOWNERS AVOID FORECLOSURE

Your expertise is essential as your clients seek encouragement, ways to keep spirits high, and cost-cutting tips. As a fiduciary, you can assist them in navigating the complexities of a new normal, particularly if financial difficulties are a reality and they are at risk of losing their home due to the inability to pay their mortgage.

It is critical to approach this conversation with your sphere from a place of contribution, care, and sensitivity. Offer resources, avoid making assumptions and simply let them know you are willing to help in any way you can. Start by sharing the measures we’ve outlined below from the Consumer Finance Protection Bureau to help you discuss this important topic.

When is it too late to stop a foreclosure?

The only time it is too late to stop a foreclosure is when the property is sold at auction to a new party, people who are unable to repay their loans often file for bankruptcy because it stops the foreclosure process. Even on the day, the property is scheduled to be sold, the foreclosure can be halted. A homeowner can stop foreclosure until the property is sold at auction.

After 90 days have passed since the last payment, the lender will usually take action against the homeowner. After 90 days, the lender sends the homeowner a delinquency notice. The homeowner can choose between two options. They can either pay the mortgage amount and avoid foreclosure, or they can continue to make no payments, causing the lender to foreclose on the property.

After 120 days and no payment has been made by the borrower, the lender is required to issue a notice indicating their intent to foreclose on the property. Following that, the foreclosure attorney will publish a notice of the impending sale in a legal newspaper. The notice period will last 5 weeks, after which the property will be sold at a public auction. During the 5-week notice period, the homeowner has the option of stopping the foreclosure by making up all missed payments (including late fees and attorney fees) or working with an attorney to stop the foreclosure.

There are several mortgage relief options for clients who are at risk of foreclosure.

1. Forbearance

Mortgage forbearance is an agreement made between a lender and a borrower to suspend or reduce payments for a specific period as they strengthen their financial situation. Under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, homeowners who are experiencing financial hardship directly or indirectly because of the national emergency, are entitled to forbearance for 180 days (and additional protections) if they have a federally or Government Sponsored Entity-backed mortgage. If your clients are unsure or do not believe they qualify for mortgage forbearance under the CARES act, they should not be deterred. They must call their lender right away to discuss this option. 

2. Reinstatement

Forbearance does not mean loan payments are forgiven or eliminated. When the forbearance period concludes, your clients will have to pay back the debt they have accrued during the period. When they pay this debt back in one lump sum, it will result in the reinstatement of their original mortgage loan terms; this is the fastest form of forbearance repayment. The other option they can discuss with their lender is a repayment plan; their lender will be fully versed on these options and can discuss which would make sense for their particular situation.

3. Repayment Plan

With repayment plans, lenders allow borrowers to gradually pay back any debt incurred during a forbearance period by increasing the borrower’s monthly payments until the additional debt has been repaid. Repayment plans vary from loan to loan.

4. Loan Modification

If the reinstatement or repayment is not feasible for your clients, their lender may be willing to amend their mortgage in another way. The Consumer Financial Protection Bureau has more information on various loan modification options, as well as other helpful advice like how to avoid coronavirus-related scams.