For many homeowners, the option to suspend their mortgage payments during the pandemic offered a great option for temporarily cutting their expenses until they could get to a firmer spot financially.
As of mid-summer, more than 1.75 million homeowners across the country remained in a COVID-19 related forbearance plan, according to Black Knight’s July 2021 Mortgage Monitor. However, the report says many of those active forbearance plans are expected to come to an end before the end of the year, potentially impacting an estimated 1 million homeowners.
This is especially significant for the Black community, which was hit hard financially as a result of COVID. A recent Pew Center Research report indicated that four-in-10 Black adults live in households that have lost jobs or wages since the start of the coronavirus outbreak.
So — if you’re a homeowner whose forbearance plan is coming to an end — what now?
While the answer may differ based on individual circumstances, one thing is clear: homeowners in this situation need to take immediate action to find out what options might be available in their unique situation. Here are some tips to consider as you look at the path ahead:
Step one: Understand who services your loan so you can take action. As you may know, the company to whom you send your home loan payments is called your mortgage servicer. Your servicer is responsible for collecting and applying payments to your loan, handling escrow accounts (if applicable), communicating loan information to you, and assisting you when you are facing financial difficulty. If you don’t already know who services your home loan, you should be able to find the name and contact information for your servicer by simply looking at your bill.
Step two: Contact your servicer to discuss the timing around when you need to plan to start making payments again and what your options for resolving the missed payments. Because servicers are required to apply investor or insurer rules when servicing your home loan and determining the options available to resolve missed payments, it’s important to know who owns or backs your loan. It could be a government-sponsored entity like Fannie Mae, or Freddie Mac, a government agency such, FHA, VA or USDA, or a bank or private company.
Step three: The specific steps you will go through with your servicer depend on who owns or backs your loan, whether you were current on your payments when you entered forbearance and if you can resume your previous payments. In some cases, it may be as simple as restarting the payments you were making prior to the forbearance and deferring your missed payments to the end of your loan term. However, depending on the investor or insurer for your loan and/or if you were already delinquent when you went on forbearance, your situation could be more complex. Options might include a loan modification program, which involves changing certain terms of the loan — such as the interest rate or time allowed for repayment — to make payments more affordable.
At Wells Fargo, we are committed to working with homeowners to find options – with the goal of keeping homeowners in their homes. However, it is important for homeowners to contact us right away, so that we help you understand your situation and begin exploring options. It’s also important for homeowners to keep engaged as we work through the process.
If you need help dealing with broader financial challenges, you can also reach out to a local HUD-approved, non-profit housing counseling agency for financial education, mortgage help services, and other free assistance. Information is available at HUD.gov or you can call 1-800-569-4287 (TDD 1-800-877-8339).
We also advise homeowners avoid anyone who asks for a fee for counseling or a loan modification, asks you to sign over the deed to your home, or asks you to make your mortgage payments to anyone other than Wells Fargo Home Mortgage. Fraudsters may be working to take advantage of you, so it’s important that you work directly with us or with a trusted adviser, such as a HUD-certified counseling agency.
With so many homeowners coming out of forbearance plans right now, it’s really important that homeowners don’t delay in understanding their situation and working with their servicer about options. We want to start today in doing everything we can to help get back on track with your home loan.