Navigating the End of Mortgage Forbearance: Your Options Explained

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When Does Mortgage Forbearance End?

Mortgage forbearance is a temporary relief measure where your lender agrees to suspend or reduce your payments due to short-term financial hardship. This relief always has an end date, typically not exceeding 12 months. The specific duration is outlined in your forbearance agreement, based on your expected recovery period.

What Happens When Forbearance Ends?

When your forbearance period concludes, you must catch up on missed payments. Here are the common repayment options:

Reinstatement

Reinstatement involves making a single lump-sum payment for the total amount missed during forbearance, including any interest and fees. After this, you resume your regular payments.

Repayment Plan

A repayment plan divides the missed payments into installments added to your regular monthly mortgage payments. The number of installments is negotiable but usually does not exceed 12 months.

Payment Deferral

If you can resume regular payments but cannot afford a lump sum or repayment plan, a payment deferral might be an option. This attaches a lien for the missed payments to your house, payable when you sell or refinance the property.

Mortgage Modification

A mortgage modification permanently changes your loan terms to reduce your monthly payment. The missed payments are added to your loan balance, potentially extending the repayment period and increasing the total interest paid.

Options After Forbearance on Government-Backed Loans

Government-backed loans, such as FHA, VA, and USDA loans, have specific guidelines for handling forbearance and repayment:

FHA Loans

FHA loans offer informal or formal forbearance, special forbearance for unemployment, and options like advance loan modification, standalone partial claim, and recovery modification.

VA Loans

VA loans allow reinstatement or repayment plans. Additional assistance to avoid foreclosure is available through May 31, 2024. For more information, contact a VA loan technician at 877-827-3702.

USDA Loans

USDA loans offer options like payment subsidies. For assistance, call the USDA help line at 800-793-8861 with your loan number, monthly income, expenses, and reason for hardship.

Other Alternatives to Consider After Forbearance

If you cannot resume regular payments or bring the loan current, consider these alternatives:

Refinance

Refinancing involves obtaining a new mortgage to pay off the original loan. This option is typically available after making at least three regular monthly payments post-forbearance.

Sell Your Home

Selling your home to pay off the mortgage may be viable. If you owe more than the home’s value, a short sale might be an option, but it requires lender approval.

Deed in Lieu of Foreclosure

In this agreement, you transfer the property deed to the lender to settle the debt. This option can significantly impact your credit and may have tax implications.

The Bottom Line

Mortgage forbearance provides temporary relief but requires you to resume regular payments and repay missed amounts. Ensure you understand the terms of your forbearance agreement and consult your mortgage servicer for guidance.

For any mortgage service needs, contact O1ne Mortgage at 213-732-3074. We are here to help you navigate your mortgage options and find the best solution for your financial situation.

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