I’m behind on my mortgage – What are my options?
If you’ve been struggling to keep up with your mortgage payments, there are a number of mortgage delinquency programs that might work for you.
People fall behind on their mortgage payments for any number of reasons; medical bills, natural disasters, unemployment, divorce and other family trauma… If you live in New York, there are several ways to get back on track with your mortgage payments. Your options for mortgage delinquency programs include:
- Mortgage Modification
- Chapter 13 Bankruptcy
Mortgage modification plans allow you to rework your current mortgage to make your monthly payments easier to manage. You, your debt lawyer, and your mortgage holder will need to renegotiate your loan at a lower interest rate for a longer period of time. Be aware that this often results in a final larger loan than what you started with, but the monthly payments will be lower.
Mortgage forbearance is temporary pause in your payment schedule. You and your mortgage holder will need to negotiate a specific time during which your monthly bill will either be lowered or waived. At the end of the agreed time limit, you will have to pay the missing months in full. This can either be as a lump sum or part of a deferment agreement.
As part of a forbearance program, you can have your missed months added to the end of the loan. You will still have to pay for those months, just at a later date. This will come due when you sell your home or refinance your mortgage.
Banks and other lenders would rather have their money sooner than later, so negotiating a deferment could be challenging. If you have a government backed mortgage loan (Fannie Mae, Freddie Mac, HUD/FHA, VA, or USDA), mortgage forbearance is a basic part of the program. If, however, your mortgage is from a private lender, you may want an attorney by your side to help with any forbearance and deferment negotiations.
The US Consumer Financial Protection Bureau offers a basic guideline for mortgage forbearance here – https://www.consumerfinance.gov/coronavirus/mortgage-and-housing-assistance/help-for-homeowners/
There are two types of mortgage forgiveness programs – 1) some partial loan forgiveness for those wanting to keep their homes; and 2) forgiveness for the entire loan, or what you owe on it, for those wanting to give up their house.
With a loan modification program, you may be able to re-negotiate the terms of the original loan to include some partial loan forgiveness, but this difficult without legal help on your side. It will also depend on how much equity you have in your home (with loan forgiveness being far more common when the property is “upside down” with its mortgage – meaning that the mortgage payoff, including the money owed, exceeds the property’s fair market value).
If you do not feel you would be able to keep your home, loan forgiveness offers other options including short-selling (selling to another party with the bank agreeing to accept as a loan payoff less than you actually owe) or a “deed in lieu of foreclosure” (when your lender takes ownership of your house without having to complete a foreclosure action).
While some of these options could have tax implications and could badly affect your credit rating, in the long run it’s better to get your mortgage problems taken care of. Make sure you talk with an attorney first to see what your options are.
Chapter 13 bankruptcy
If you are behind on other bills, not just your mortgage, you may need to look at Chapter 13 bankruptcy. Chapter 13 allows you to develop a number of plans to pay off your debts, including what you owe on your mortgage over a proposed period of time – generally up to five years. As part of Chapter 13, you and your lawyer will be able to work with your mortgage lender on a modified program, which may include some debt deferment, and/or some partial forgiveness. We’ll be covering the major aspects of Chapter 13 bankruptcy in another post.
Other Things to Know
Scammers – If you get a call promising to modify your mortgage for you, this is a scam. Only the bank holding your loan can make any modifications. For those in New York, Attorney General Letitia James has a page on mortgage help, talking about these scammers – https://ag.ny.gov/consumer-frauds/help-homeowners
COVID Assistance – If the COVID-19 pandemic directly impacted your ability to pay your mortgage on time, the federal government has a number of resources available – https://www.fhfa.gov/Homeownersbuyer/MortgageAssistance/Pages/Coronavirus-Assistance-Information.aspx
There is a lot to know about the various mortgage delinquency programs and it can easily get overwhelming. If you’d like to talk directly to a compassionate, knowledgeable, human being, reach out to New York debt attorney Ronald Weiss for a free consultation. He can tell you what, if any, mortgage delinquency plan is right for you, and help you get the process started. Call 631-271-3737 and take the first step to a fresh start.
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