Mortgage Foreclosure Relief In the COVID-19 Era

The CARES Act began a new era of mortgage foreclosure relief options for homeowners. Not only can homeowners take advantage of mortgage forbearance in many cases, they can avoid the fear of foreclosure during the nationwide foreclosure eviction moratorium.

However, there are some important guidelines to keep in mind when using any of the new types of mortgage foreclosure relief. Let’s go over some of the key foreclosure relief options below.

Foreclosure Eviction Moratorium

One of the most important provisions of the CARES Act halted all foreclosure proceedings for federally-backed mortgages. This eviction moratorium prevents homeowners from losing their homes despite not making payments.

At least until December 31, 2020, homeowners with federally-backed mortgages cannot be foreclosed on. If you have a mortgage through Fannie Mae, Freddie Mac, the FHA, the VA, or the USDA, lenders cannot start or continue any foreclosure proceedings.

This means that you cannot be evicted from your home by your lender, even if you stop making your payments, and your lender cannot take control of your home.

Keep in mind, this is only for federally-backed mortgages. The rules differ for non-federally-backed mortgages since the CARES Act does not offer these options to those borrowers. However, many states have their own foreclosure and eviction moratoriums that can fill in this gap in protection.

Does this Mean I Don’t Have to Make My Mortgage Payments?

No! You still are obligated to make your loan payments, even if your lender can’t foreclose on the property at the moment.

Your payment history still affects your credit. Missing even one payment can severely decrease your credit score.

And if you are still behind on payments by the end of the foreclosure moratorium, your lender could pursue foreclosure at that time.

The moratorium is not a free pass on your mortgage; it’s designed to give homeowners time to get back up on their feet rather than face foreclosure in the meantime.

In addition to the foreclosure eviction moratorium, the CARES Act introduced a comprehensive mortgage forbearance option for homeowners. Let’s explore this option in greater detail now.

Mortgage Forbearance

Mortgage forbearance is when a lender pauses your payments temporarily. This can be especially useful if you’ve lost your job or experienced a reduction in hours or pay and are struggling to make your payments.

Rather than face default and foreclosure, mortgage forbearance gives you the chance to sort out your finances before payments resume. Forbearance can last for a very long (or comparatively short) amount of time – there is no set limit for as to how long it can go.

Despite its benefits, mortgage forbearance might not be the ideal option for you.

Is Mortgage Forbearance a Good Idea?

This very much depends on your personal situation.

If you have the money to make your existing payments, you should probably continue making them.

This is because mortgage forbearance simply delays your payments for a future date. Sometimes this date is immediately after the end of the forbearance period. Other times the payments are moved to the very end of the entire loan payment schedule. Simply put, forbearance is not a free lunch.

But, if you have no other way to make your payment, taking forbearance is an easy choice. Often, the fees from late payments and defaulting on a mortgage loan are substantial. And this isn’t even to mention the potentially terrible impact on your credit score from missing required payments.

Forbearance eliminates these drawbacks by giving you a window to sort things out financially. However, it does not remove your long-term obligation to your lender.

How to Get Mortgage Forbearance

You can request forbearance by asking your mortgage servicer directly. The CARES Act requires lenders to grant forbearance requests from those “experiencing a financial hardship due, directly or indirectly, to the COVID-19 emergency.”

In other words, as long as you can prove that you have experienced some sort of financial hardship due to the pandemic, you have a legal right to mortgage forbearance if you have a federally-backed loan. This applies even if you are delinquent on the loan at the time that you request forbearance.

A Final Word on Mortgage Forbearance

Remember, mortgage forbearance does not erase what you owe. All forbearance does is delay your payments for a later date.

Forbearance should be used only with caution. It is meant to be a tool to temporarily buy time, not to permanently waive your obligations.

If you can make your payments, make them. Only consider mortgage forbearance if you cannot make your current mortgage payments.

And don’t forget that states can offer their own relief programs and mortgage foreclosure guidance. For example, Illinois state has encouraged all lenders to offer effected borrowers up to 90 days of mortgage forbearance. Each state can enact a variety of different mortgage foreclosure relief measures.

Other Options: Direct Grants to Homeowners

Like forbearance and other foreclosure relief options, states have offered direct grants to homeowners in some cases.

In June 2020, the state of Illinois created emergency mortgage assistance program. Homeowners who were behind on their loans or had to take forbearance were eligible for up to $15,000 in state grant money. Applications for this program ended in September, but they remain a great example for the lengths that states can go to in offering mortgage foreclosure relief.

There’s no telling whether additional funding will become available in the near future. But foreclosure relief options are constantly changing in the COVID-19-influenced fiscal climate.

Conclusion – Mortgage Foreclosure Relief Options

If you’re struggling financially and are worried about falling behind on your mortgage payments, hopefully one of these foreclosure relief options can help buy you time to get back on track.

The COVID-19 era has presented a host of new challenges. Thankfully, the CARES Act and other programs have provided homeowners with some powerful relief options.

Realize that these programs are always subject to change. New regulations and programs can pass at seemingly anytime, and your options for mortgage foreclosure relief can change.

Contact an Experienced Foreclosure Defense Attorney

Foreclosure in the state of Illinois can be a complicated process and without legal representation, you may lose your home, have a decreased credit score, and fail to achieve financial freedom. Contact the experienced attorneys at Johnston Tomei Lenczycki & Goldberg LLC. We can help you understand your legal rights, and help ensure that they are protected. Call us today at (847) 549-0600 or email us at info@lawjtlg.com to schedule a free consultation.