The Coronavirus Aid, Relief, and Economic Security Act (“CARES”) has provided 180 days of mortgage forbearance (pause in payments) for individuals who received loans backed by the federal government or other government-sponsored entities. Additionally, some private lenders followed suit, and provided their borrowers with forbearance options during this virus. According to the Mortgage Bankers Association (“MBA”), as of June 28, 2020 roughly 8.4% of all home loans (4.2 million borrowers) are in forbearance. Unfortunately, forbearance is about to expire despite the fact that many of us are still feeling the strains of the virus’ resurgence in California. This article will briefly address the options available to you as your mortgages become due.
The first option is simply to contact your lender and request an extension. According to the Consumer Financial Protection Bureau (“CFPB”), those who were eligible for the 180-day forbearance under the CARES Act are also eligible for a 180-day extension. It is essential that you contact your lender prior to the expiration of your forbearance, as simply missing payments will likely result in penalties as well as a serious hit to your credit score. Remember, forbearance doesn’t mean that you never have to make the payments, it just delays the due date. As such, it is prudent to save as much money as possible in the interim, so you have options available to you when your bill comes due.
If you were not eligible for forbearance under the CARES Act, you may want to take advantage of historically low interest rates (around 3%); refinancing your home may be your safest bet in these turbulent times. Some opportunistic lenders will attach a fee amounting to between 2% and 6% of your total loan amount to refinance, but there are situations where that may be the better option. Dust off your calculator and see whether the new payments (plus the fee) would reduce the lifetime cost of your loan. If not, look at your budget and see if paying less now is necessary to save your home in the short-term; it may be your only option.
Lenders are not oblivious to the fact that many homeowners are still reeling from the impact of this virus and have rolled out loan modification programs to assist distressed borrowers. Remember, banks don’t actually want your house, they want your money; they will find reasonable ways for everyone to get what they want.
If you are in dire straits, you may want to consider simply selling your home. If you have read our previous articles, the housing prices in Studio City, Sherman Oaks, Encino, and Tarzana are actually increasing notwithstanding the virus’ impact. The agents at the Chernov Team will negotiate the best possible price for your property, and that money should enable you to find a more affordable home and ride out the disaster that is this pandemic.
At the Chernov Team we understand that knowledge is power, and knowledge of available financial options when it comes to your home is powerful knowledge indeed. At the Chernov Team we know that whoever comes to the table with the most leaves with the most, and the Chernov Team always leaves the table with the most.
