Foreclosure moratorium ends, but struggling homeowners may still be safe

Now that the federal moratorium on mortgage foreclosures has ended, homeowners will have to reckon with thousands of dollars of overdue payments that were paused for more than a year. But don’t despair, there’s still a lot of help available.

President Joe Biden announced on Tuesday a temporary halt on evictions in many parts of the country, but the initiative did not specify additional relief for homeowners who have fallen behind on mortgages because of the pandemic.

Under the Cares Act, borrowers hit hard by the pandemic and having trouble making their mortgage payments were provided with two vital types of protection.

One was a foreclosure moratorium, which ended July 31.

The second protection gave borrowers the right to ask for and receive a forbearance, which permits them to temporarily stop making mortgage payments.

The automatic approval of pandemic-related relief was key. People generally couldn’t be rejected for forbearance. While officially the relief only applied to federally owned or backed loans, many private lenders followed the government’s lead.

As pandemic-specific protections sunset, help is still available to prevent homes from going into foreclosure. Here’s what you need to know if you can’t pay your mortgage.

What happens now with the end of the moratorium?

Lenders can proceed with foreclosures, especially for borrowers who have abandoned their properties or haven’t responded to outreach from their mortgage servicers.

The Consumer Financial Protection Bureau says that if you received forbearance under the Cares Act and you’re still experiencing financial hardship because of the pandemic, you may be entitled to ask for and receive an extension.

You can get an extension as long as you haven’t reached the maximum months of forbearance, points out Mark McArdle, the CFPB’s assistant director for mortgage markets. For most borrowers who began forbearance last spring, the 18-month maximum will be this fall.

“A consumer who has not entered forbearance as of now can enter forbearance,” McArdle said. “Folks who have exited forbearance and then want to reenter, they can still reenter.”

But you need to ask for assistance. It won’t happen automatically. You need to contact your mortgage servicer.

How much time do I have?

The Federal Housing Administration announced an extension of the foreclosure-related eviction moratorium for foreclosed borrowers through Sept. 30.

“FHA’s eviction moratorium extension will avoid displacement of foreclosed borrowers and other occupants who need more time to access suitable housing options after foreclosure,” the agency said.

The Biden administration has extended the forbearance enrollment window through Sept. 30 for government-backed loans, about 75% of all mortgages, according to the General Accountability Office.

Such loans are guaranteed, insured, made directly by, purchased or securitized by Fannie Mae, Freddie Mac, and the Department of Housing and Urban Development/FHA, the Department of Veterans Affairs, and the Agriculture Department.

The extended pandemic-related forbearance could last up to 12 months.

If I’m exiting a forbearance, what happens next?

If you’re still experiencing financial trouble, starting Aug. 31, most mortgage servicers must tell you about repayment or other options when they reach out to you, according to a CFPB rule that has been updated in light of the pandemic. The watchdog agency says that except in limited circumstances, servicers can’t start the foreclosure process before Jan. 1, 2022. The servicer has to reach out to you first, examine your situation and then explore options to help you avoid foreclosure.

You can find a lot of answers to your questions and guidance on the CFPB’s website, consumerfinance.gov. Look for the unified housing link.

What are my options for catching up on missed mortgage payments during the moratorium?

There are various ways you can deal with past-due mortgage payments.

Generally, there are four options, according to McArdle:

• Reinstatement (pay it all back in a lump sum).

• Payment plan (higher payments to pay back over a period of time).

• Deferral (move missed payments to the back of the loan, resume making old payment).

• Loan modification (changing the terms of the loan to achieve a lower payment).

“The last two options are the ones most consumers will use to exit forbearance,” he said.

If none of these options are doable, you could sell your home. And unlike during the Great Recession, you may walk away with some money because housing prices are skyrocketing in many areas.

“Some folks have equity, which is different than the last crisis,” McArdle said. “It’s possible that if you need to leave your home, you can leave with some equity, as opposed to eroding that equity through the foreclosure process.”

If I don’t have money to pay my mortgage, why should I contact my loan servicer?

Your lack of communication could actually speed up the foreclosure process. In some states, a foreclosure can happen in as soon as a few months. The help you need won’t happen if you don’t communicate with your mortgage servicer.

Under the new CFPB rules, the servicer can proceed with a referral for foreclosure if the company hasn’t received any communications after 90 days.

“Don’t dodge the call from your servicer,” McArdle said.

What should I do if my loan servicer isn’t helping me?

HUD-approved housing counselors can discuss options with you if you’re having trouble getting help from your mortgage servicer.

At hud.gov, you can find a link to a housing counseling agency or call toll-free 800-569-4287.

If you are not getting the assistance you need, you should also file a complaint with the CFPB. At consumerfinance.gov, click the link that says “Submit a Complaint.”