Dealing with the end of tolerance? You have options


What happens next?

From a service agent’s perspective, the ideal outcome would be for you to hand the company a check for the missing payments at the end of the forbearance period. This is unusual, especially if you owe 18 months of mortgage payments.

Typically, repairers offer a variety of reimbursement options, depending on your ability to pay. They take care of loan management, not foreclosure management, and usually want to work with you. Here are the common options that a lender can offer:

  • Repayment plan The duty officer will ask you if you can repay the amount you missed in the forbearance in three to 12 months.
  • Upfront payment The service agent will ask you if you can continue to make your mortgage payment as before. If this is the case, the service agent will add the payments that were past due as a lump sum to the end of your loan, usually without incurring interest. Eventually, you can refinance the mortgage or sell the house and pay off your principal and the balance that was forborne.
  • 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 repayment period, but like the final payment, you could also refinance your loan or pay off the balance when you sell the house.

A fourth option would be for the lender to offer a new 40-year mortgage, which would reduce your monthly payment amount. The maximum term of a typical mortgage is 30 years. Some lenders already offer 40-year mortgages, but they are rare. A 40-year mortgage would increase the amount of interest you pay over the life of the loan. If you had a $ 250,000 30-year mortgage with an interest rate of 3.125% and refinanced into a 40-year note at the same rate, you would pay $ 52,700 in additional interest over time.

If your forbearance period is ending and you simply cannot make one of these solutions work, you will likely have to sell your home. On the positive side, the strength of the housing market has pushed up home values. The S&P Case-Schiller National Home Price Index in the United States has jumped 16.6% 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 as much as you owe, you may be able to give the lender what’s called a deed in lieu of foreclosure – in other words, you return the house to the service agent. , to settle the debt. As a general rule, the housekeeper will require that the house be in good repair and swept clean; some will even offer up to $ 3,000 in relocation costs. You may also be able to do a short sale, whereby you sell your home on the open market for less than you owe, but acceptable to the repairman.

If you’re in financial difficulty, talk to your loan officer about your options. You may be able to find a mutually acceptable way to escape foreclosure and eviction – the worst-case scenario. Respond to any notices you receive by phone or in writing. Breaking out of tolerance can be a challenge, but don’t make it more difficult by ignoring the realities.


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