Is forbearance four bears and ants?
What is Forbearance?
What is forbearance? By definition, forbearance is a temporary agreement between a lender and a borrower to postpone or reduce loan payments for a specific period of time. The lender allows the borrower to enter into forbearance due to a financial hardship beyond the borrower's control. A loss of income or unexpected medical expenses would allow the lender to make such an agreement.
During forbearance, the borrower may be required to make reduced payments or no payments at all. Interest may continue to accrue on the loan during the forbearance period, which means that the borrower may end up owing more money in the long run.
Forbearance is typically offered as a last resort option for borrowers who are unable to make their regular loan payments. It is generally not a permanent solution to financial problems. The mortgage lender is actually delaying the process of foreclosure when a mortgage is in forbearance.
When forbearance ends, the missed payments will have to be repaid. Mortgage lenders may add the missed payments to the end of the loan or the borrower would have to reinstate the loan. When there is no ability to pay the arrears in full then the mortgage lender would attempt to qualify the borrower for a mortgage or loan modification.
When the borrower applies for a mortgage or loan modification, hopefully their income has not been affected. In some cases, borrowers jobs went away or they may have had to take a different job at lower pay. If this is the case, the borrower actually may not qualify for a loan modification.
COVID-19 Coronavirus Pandemic
The COVID-19 pandemic created financial problems for many homeowners. During the pandemic, businesses closed, working from home became the norm, and social distancing was mandatory causing a lot of jobs to be lost. Homeowners with mortgages had no choice but to enter into forbearance as the future was unknown. Mortgage lenders allowed most borrowers to enter into forbearance programs.
This was a great solution. Homeowners took advantage of this option and qualifications were minimal. The borrower would just call the mortgage lender, tell them the were affected by COVID and the mortgage would be put into forbearance.
Homeowner Assistance Fund
There are other options. The Federal Government created the CARES act. The CARES act created the Homeowner Assistance Fund. This fund gives homeowners grants to help with missed mortgage payment. Up to $9.961 billion is available for homeowners throughout the US. "Funds from the HAF may be used for assistance with mortgage payments, homeowner's insurance, utility payments and other specified purposes." More information about the national HAF program is here. Each state administers its own program for qualification and distribution of the HAF funds.
California Mortgage Relief
"California Mortgage Relief" is California's version of the Homeowner Assistance Fund. The California Mortgage Relief Program website is found here. California is distributing $1 billion to homeowners that need financial housing assistance due to the COVID-19 coronavirus pandemic. The funds from the HAF program are used to get caught up on past due payments on first mortgages or property taxes. HAF funds are a grants and do not need to be repaid.
The CA Mortgage Relief Program helps even if the home is already in foreclosure. The program offers funds up to $80,000 in delinquency for mortgage payments and up to $20,000 in property taxes.
To qualify for the CA Mortgage Relief Program, a borrower needs to be behind in either mortgage payments or property taxes. There is an income limit of 150% of the AMI (area median income). You can find the income limit for your California county here. Most major mortgage servicers/lenders are participating in the program.
If a notice of default or a notice of sale has been filed against the property, do not wait. It is best to apply for the program as soon as possible. Apply for California Mortgage Relief by clicking the button below.
Many people have experienced financial and other hardships due to the COVID-19 coronavirus pandemic. There are options, don't give up. If you need help or have questions do not hesitate to contact me at 760-274-0991.