2017's hurricanes are long gone, but some homeowners affected by Irma, Harvey, and Maria are trying to avoid foreclosure after their bank-approved forbearance caused them to end up in foreclosure.
How could that be?
When hurricane Irma tore through Florida, it knocked out power and damaged property. A lot of people missed work and had to spend extra money on things like home repairs, replacement groceries, fuel for a generator, or a hotel. All the extra expenses made it hard or impossible to pay the mortgage.
Fortunately, many banks offered some assistance to homeowners going through a hurricane-related hardship. Unfortunately, after that temporary assistance ended, some homeowners are finding themselves worse off than before.
Forbearance and Foreclosure
The help that was offered to many homeowners affected by hurricane Irma was a forbearance. A forbearance just means that you're allowed to not make mortgage payments for some period of time, usually 3-6 months. Without having to make a mortgage payment, which is most people's biggest expense, they were able to use their money to survive the hurricane's aftermath.
But something strange has been happening to Florida homeowners. After the forbearance ends: the bank is sending a notice of foreclosure for missing all the payments they had permission to miss. Or they demanded that they pay for all the missed payments in one lump sum! If the homeowner doesn't have the cash to pay off the missed payments, they end up in foreclosure.
Unless it was put in writing, there's no way to prove exactly what the bank told you. Maybe the bank lied. Maybe the representative you spoke with didn't understand what they were offering. Maybe they didn't properly explain what was going to happen, or maybe they did but unfortunately, you didn't understand.
Remember, a forbearance is meant to be a temporary solution to a temporary problem. After it ends, the payments you missed have to be made up. Here are the ways that can be done:
Recapitalization means the missed payments are folded back into the principal of the loan. This can cause the monthly payment to go up slightly.
A deferment is when an amount of money is put to the side (deferred) until the loan matures and it has to be paid back. Usually deferments are interest free.
Homeowners who've had a forbearance can be told that they need to repay all of their missed payments in one big chunk, which they may not be able to do. Others have been given the option of paying back the forbearance in smaller amounts over months.
A loan modification is a permanent change to one or more of the terms of a loan, such as its interest rate, principal balance, or term length. For homeowner's who have missed mortgage payments for any reason, a loan modification is often the only way for them to keep their home and avoid foreclosure.
When you're approved for a loan mod, your loan will be returned to normal servicing. The missed payments can be deferred to the end of the loan or recapitalized. It doesn't cost anything to apply for a loan modification and your credit score will not be checked.
Your mortgage servicer probably didn't tell you how the forbearance was going to be dealt with after it ended. They might not have known themselves. They work for the investor who owns the loan and may need to wait for instructions from them. If you really needed the help, you had to accept the forbearance even if you didn't know all the details.
It seems that a lot of people accepted an offer of a 6 month forbearance from their bank. About six months has passed since Hurricane Irma hit, as of this writing, and we are expecting many more homeowners to have issues related to their forbearance.
If your feel that your bank verbally told you one thing and then did another, that's terrible. Unfortunately, if you have no way to prove it, it becomes a situation that you must address. If your bank is threatening foreclosure, it's a serious matter.
Getting Professional Assistance
If your bank now claims that all the 3-6+ payments from your Hurricane Irma forbearance are now due, you should consider hiring an attorney. Your lender will be treating your loan as if it's 6 months past due and pursue foreclosure. The bank has their attorneys, and it's not a fair fight unless you have one on your side. Options like a loan modification can save you from foreclosure, but they can be quite difficult to get when you don't have an understanding of guidelines your bank may need you to meet.
Did your bank put you into foreclosure after telling you that you had a forbearance plan? Have you had mortgage problems associated with hurricanes Irma, Harvey, or Maria? Tell us about it in the comments below.
If you'd like a free consultation instead, click here.
Image courtesy of Sira Anamwong at FreeDigitalPhotos.net