now is the time to modify your mortgage

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.
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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:

• the mortgage servicer must confirm that the borrower has submitted a complete loss mitigation application;
• the mortgage servicer must confirm that the borrower remained delinquent since submitting the loss mitigation application; and
• the mortgage servicer must confirm that the evaluation process has been exhausted pursuant to existing criteria.

3.  The borrower has been unresponsive to letters, offers, phone calls from the mortgage servicer.

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:

1. loan modification must not extend the loan term more than 40 years from the effective date of the modification;
2. loan modification is available to borrowers with COVID-19 hardships;
3. loan modification must end any pre-existing delinquency;
4. mortgage servicer is not allowed to charges fees in connection with the loan modification and has to waive certain existing fees such as late fees and penalties incurred on or after March 1, 2020; and
5. loan modification may not increase the monthly principal and interest payment on the loan from amount required prior to the loan modification.

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.