NOW IS THE TIME TO MODIFY YOUR MORTGAGE
I attended a conference a couple of weeks ago and listened to a discussion of the current state of mortgages, mortgage modifications, and the end of the Covid forbearance program. I thought this was very important and helpful information that people need to know. If this information does not apply to you, it may be helpful to a family member or friend, so please pass it on to anyone who needs it.
Here is what I learned. For anyone who, since the start of the Covid pandemic, has had issues with making their mortgage payment and/or used the forbearance program and have several payments now about to come due, now is the time to contact your mortgage company and request a modification.
The foreclosure moratorium under the CARES Act has ended; however, The Consumer Financial Protection Bureau (CFPB) issued a rule which provides additional temporary safeguards for borrowers such that the foreclosure process cannot begin on most loans before January 1, 2022. These additional safeguards will expire on January 1, 2022.
Until January 1, 2022, mortgage servicers cannot commence foreclosure on a mortgage in default unless one of the following three safeguards has been met:
1. The property has been abandoned;
2. A loss mitigation evaluation has been completed. This includes the following:
These temporary safeguards are not required currently if the borrower was more than 120 days delinquent prior to March 1, 2020, or if the applicable statute of limitations for the foreclosure action will expire prior to January 1, 2022. The rule does not apply to reverse mortgages. Lastly, the rule only applies to a mortgage on the borrower’s principal residence.
Mortgage modifications will be much easier to obtain under the rule that will last to January 1, 2022. So, if a person was denied a modification in the past, he or she may still be able to obtain a modification under the current rule and in less time and with less paperwork required. The current rule allows mortgage servicers to review a loan for a loan modification even if the borrower’s application is incomplete. To qualify for a review of an incomplete loan application, the following criteria must be met:
The temporary safeguards also require “reasonable diligence” by mortgage servicers in their efforts to help borrowers currently in a forbearance plan. Mortgage servicers must now contact borrowers prior to the end of a forbearance plan to see if they want to complete an application for a loan modification. Mortgage servicers are required to comply with one aspect of the temporary safeguards until October 1, 2022 which is the live contact requirement under the early intervention rule. Mortgage servicers now have additional information that must be provided to the borrower at the time of live contact. The additional information required to be provided is different based on whether the borrower is currently in a forbearance plan at the time of contact.
Most mortgage servicers have an annual holiday moratorium period on foreclosure sales during the months of November and December. Many borrowers are still in forbearance plans which can still be extended under the CARES Act.
The bottom line is that there is that based on the information above, there is still time to apply for a modification under the simplified and more lenient rules. However, time is running out. You must act now and either contact your mortgage company or respond to any communications from your mortgage company to get that modification process started before the end of the year.
If you are unable to modify your mortgage and are continuing to have issues with past due mortgage payments, a Chapter 13 Bankruptcy may be the answer to take care of those past due payments and save your home from foreclosure.
Click here for a Free Consultation, no obligation and no pressure. Your consultation can be in person if you are near Cullman County, Alabama or by telephone if you prefer or are located elsewhere in Alabama. Find out whether Chapter 7 bankruptcy or a Chapter 13 bankruptcy is right for your situation.
Yes. You may be able to save your house from foreclosure by filing a Chapter 13 bankruptcy in Alabama. A Chapter 13 bankruptcy allows you to put your arrearage (the payments you have missed) in your Chapter 13 plan and pay them back over the term of your plan (usually 5 years). You will have to pay the entire amount of your arrearage back over this period of time. This in effect “catches up” your mortgage payments, keeping the mortgage company from foreclosing.
Other than allowing you to catch up your back payments the bankruptcy court cannot affect the terms of your mortgage. Therefore, beginning the month after you file for bankruptcy you will have to begin making your regular monthly mortgage payments.
This can be difficult since you were already missing payments and now you are to begin making your mortgage payments again plus a payment to the bankruptcy court. This will require some serious budgeting and discipline, but it will be very important for you to make both of these payments. While there may be some ways to prevent foreclosure if you miss payments post-petition (i.e. after your bankruptcy has been filed), it will be difficult. You will also have to maintain your homeowner’s insurance coverage.
To stop the foreclosure your bankruptcy will need to be filed prior to the foreclosure sale. The 2005 amendments to the bankruptcy laws have made the preparation of bankruptcy petitions much more time consuming. I would recommend you see an attorney immediately and not later than 1 week prior to the foreclosure sale.
The bottom line is while it may take some cutting back on other expenses, a Chapter 13 bankruptcy in Alabama can save your house from foreclosure.
Do you have questions or comments regarding this topic? Please email me.
Here is a brief overview of a bankruptcy.
There may come a point in a person's life, whether its due to health problems, spending problems, employments problems, etc., where a person owes more money than even the tightest budget will allow him to pay. When this happens and monthly payments begin to be missed, the people and businesses who are owed the money (the creditors) start calling and sending letters. Eventually, if the creditors are not satisfied, there are foreclosures and repossessions of vehicles and/or lawsuits getting filed which will then lead to judgments, garnishments and liens.
A bankruptcy can stop most of these bad things from happening. A bankruptcy can immediately stop the phone calls, letters, lawsuits, garnishments, foreclosures, and repossessions. This is called the Automatic Stay and it "stays" all collection efforts. A Chapter 7 bankruptcy will wipe out almost all unsecured debt, like credit cards and medical bills. Most of the time under a Chapter 7 you will be able to keep your house and vehicles if you are current or almost current on those payments and continue to make your payments to those creditors as agreed to in your contract.
A Chapter 13 allows you to create a plan to pay some or all your debt back to the creditors. A Chapter 13 can stop your house from being foreclosed on or your car from being repossessed by allowing you to pay back your arrearage over time. It will also protect a house or vehicle in which you may have too much equity under the State of Alabama's exemption laws. Alabama's exemptions are very low, so this comes in handy frequently. The amount you pay back is based on your income and expenses and the amount of debt you need or want to pay back over the length of the plan. Most plans last for five (5) years which is the maximum length of the plan.
So, the bottom line is a bankruptcy can stop collections of debt by creditors, wipe out all or part of your debt, and/or create a plan to pay back some or all of your debt while normally letting you keep the real and personal property you want to keep.
It is not all rosy though. There are issues that can make filing bankruptcy very tough. Bankruptcy also has long term effects on your credit. I will deal with these issues in later posts.
If you are having financial difficulties, find out the truth about how bankruptcy may be able to help. Request my free book and/or call attorney Richard L. Collins or another experienced bankruptcy attorney.
I am an attorney located in Cullman, AL. I practice extensively in the area of consumer bankruptcy law, that is, I file Chapter 7 and Chapter 13 bankruptcies for individuals. I handle cases all over North Alabama and have helped hundreds of clients through the bankruptcy process., I receive many referrals from former clients and their families and other attorneys. Why? Unlike other firms, I have a local office. If you are from out of town, we have the technology available to keep your traveling to a minimum. Also, unlike many firms, you will meet personally with an attorney, not a paralegal. An attorney will handle your case from start to finish. ,