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CARES Act, Mortgages

NJ Loan Modifications After Forbearance are NOT a Sure Thing

On Behalf of Veitengruber Law | Oct 20,2021

If you were granted a mortgage forbearance during the pandemic and it has now come to an end (or will shortly), make sure you have all of the facts. Otherwise, you could end up in NJ foreclosure quickly. Those homeowners who wish to stay in their homes after forbearance ends do have options - even if it seems like you'd still be unable to make mortgage payments every month.

What is mortgage forbearance?

While the concept of mortgage forbearance has been around for ages, it has become available to homeowners with less strict qualifications during the COVID-19 pandemic in 2020-2021. Essentially, a forbearance gives you the option of hitting pause on your mortgage payments until you are in a better financial situation.

Borrowers with a Fannie Mae or Freddie Mac loan were eligible to request (and fairly easily be approved for) a forbearance according to the CARES Act. Additionally, even though they didn't have to, many private lending institutions offered up the option of forbearance to their borrowers.

What happens to the mortgage payments I missed?

When your mortgage forbearance period ends, you will be required to start making mortgage payments again. The mortgage payments you "skipped" during forbearance are not forgiven, so you will have to repay the money somehow, but there are different ways to make that happen.

Lump Sum Payment

If you've been able to set aside some money while you didn't have a monthly mortgage payment, you can simply make a one-time payment and get right back on track.

Temporary Loan Modification

In coordination with your lender, you can curate a plan to repay the money you owe by adding onto your monthly payments for a specified amount of time until you're flush again. At the end of this repayment period, your mortgage payment will resume as normal.

Loan Modification

Changes to either the life of your mortgage (repayment period), interest rate, principal loan amount, or tacking your forbearance balance onto the end of your existing loan are the most common ways to modify a mortgage.

It's absolutely crucial that homeowners realize the following:

Loan modifications and/or a repayment plan will not automatically be put into place after forbearance. Borrowers must apply for a modification of any kind. Being in contact with your lender is not negotiable at this time; it's a must.

Borrowers who are taken out of forbearance but don't reach out to their lender will find themselves in very hot water very quickly. Along with losing your home, your credit score will potentially be destroyed.

For help communicating with your lender or applying for a loan modification, you don't have to handle it on your own. Hiring a professional might sound like a financial investment you don't want to take on right now, but if you know you won't do what's required of you to save your home, reach out for help. You'll likely be surprised at how affordable it is when weighed against the cost of a foreclosure defense attorney and the potential of losing your beloved home.


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