The government has made it very easy for homeowners to get a forbearance on their mortgage during the pandemic. This has been a life line for many homeowners who have been affected financially by COVID-19. In this time of crisis, all a borrower has to do is pick up the phone and call their mortgage servicer and ask for payment relief. But how are homeowners going to pay the forbearance back? Are homeowners really being protected from delinquent marks and credit consequences?
If you have secured a COVID-19 mortgage forbearance that works for you and your family this can be a great help. However, it is important to discuss with your mortgage servicer how they will be handling your past due payments at the end of the forbearance. 30 days before the forbearance ends you should assess your situation with your mortgage servicer to determine your next steps. Some servicers are requiring borrowers to make one large balloon payment when the forbearance ends, which is the worst case scenario for many homeowners. Other options are:
- reinstatement
- repayment plan
- payment deferral
- loan modification
- refinancing
If you guessed that people experiencing foreclosure or the threat of it have a higher incidence of physical and mental health issues including suicide and trips to the emergency room, you guessed right. That's no surprise given the stress of potentially losing your largest investment, moving your family, and having your credit negatively affected. However, you may not have guessed that having an illness is the reason some people go into foreclosure in the first place.
A 2014 study shows that people who had a chronic health condition that worsened as they aged were twice as likely to default on their mortgage and more than two-and-a-half times as likely to fall into foreclosure than people with a chronic condition that did not get worse over time.
The study found that people who got sicker were more likely to lose their job, their income, and health insurance, which made foreclosure more likely. Most people can't make their mortgage payment for long if they don't have a job, no matter the reason for losing it.
And people with a chronic condition who didn't lose their jobs were still at increased risk of defaulting on their mortgage loan. It's thought this is caused by the high medical costs accrued when treating a chronic condition.
No matter what you think the solution is or isn't, the reality is inescapable: healthcare is expensive, and it can cause you to go into foreclosure. It's something that's already happened to many people, and will happen to plenty more.
If you're experiencing a temporary hardship that has caused you to be unable to make your monthly mortgage payments, a forbearance agreement is an option to consider that helps you keep your home out of foreclosure until your hardship passes. A forbearance agreement allows you to:
- Reduce or suspend mortgage payments
- Stay in your home
- Avoid foreclosure
- Have time and flexibility to overcome your hardship
