As a result of the Covid-19 pandemic, many homeowners are potentially eligible for mortgage relief in the form of a forbearance which can delay payments up to 360 days! If you have been financially affected by Covid-19, you will need to determine what type of forbearance you may be entitled to, if any. Under both New York State law and the CARES Act passed by Congress, if you are experiencing financial hardship due to Covid-19, you have the right to request a 180-day forbearance which can be renewed for an additional 180-day period. If eligible, you can receive a forbearance, during which time you do not need to make mortgage payments.
However, some mortgages are neither covered by the CARES Act nor New York State regulations. Homeowners with non-covered loans have much fewer options and nothing guaranteed by law. However, they still may request a forbearance which would be up to the discretion of the lender. Forbearances for these mortgages will generally be issued for a 3-month period, if at all. In contrast to a forbearance obtained pursuant to the CARES Act or New York State Law, the full mortgage arrears balance is typically due at the end of the forbearance period for these short, three month forbearances. As a result, borrowers with these mortgages may wish to seek a loan modification or to seek protection through Chapter 13 bankruptcy. Chapter 13 bankruptcy provides a 60-month re-payment plan and possibly an option to pursue a loan modification in the Bankruptcy Court’s loss mitigation program.
While you are in a forbearance period, it is a good idea to routinely check your credit report to make sure there are no errors or inaccuracies on it. You can obtain a free report at the following web address: https://www.annualcreditreport.com/index.action. If you stopped making mortgage payments without a forbearance agreement, the servicer can report this information to the credit reporting agencies, and it can have a negative impact on your credit history. However, if you were otherwise current on your account before the Covid-19 pandemic and have received relief as defined by the CARES Act, your servicer is required to report your account as current. So, if you find an error on your credit report, you can work to dispute it. Please follow this link for more information on disputing errors on your credit report: https://www.consumer.ftc.gov/articles/0151-disputing-errors-credit-reports.
Resuming Payments and Paying Back What Is Owed
As you approach the end of your forbearance period, it is important to communicate with your servicer. In a traditional forbearance, a homeowner would start making their regular mortgage payment at the end of the forbearance period and an additional payment to payback the arrears from the forbearance period. Typically, these repayment plans would be for 6 to 12 months and would sometimes require an additional down payment at the end of the forbearance. There are several different options available to a homeowner under either the CARES Act or New York State law with regards to the repayment of the forbearance. You will have to make arrangements with your servicer to figure out what repayment options are available for the mortgage payments which were unpaid during the forbearance period. The method of repayment varies depending on your loan and the protection provided under the law. Not all borrowers will be eligible for all options. Borrowers should ask their servicer how these repayment programs work and what they can expect in terms of repaying the unpaid mortgage payments.
These options are available for homeowners who received a forbearance under the CARES Act or from a bank that is chartered in New York. If you can afford to resume your regular monthly mortgage payment, but you cannot afford to repay all the payments that were suspended during the forbearance period, you may be eligible for a payment deferral which puts your missed mortgage payments into a payment due at the sale or refinancing of your home, or at the end of the loan. Additionally, if you can afford to pay a higher monthly mortgage payment for a period of time, you may be eligible for a repayment plan which allows you to repay past due amounts over a short period of time while you restart making your regular mortgage payments. If you need more time to make the payments, you may be eligible for a monthly repayment plan in addition to your regular monthly payments for the remaining term of the loan. Another option is to extend the term of the loan for the length of the forbearance and making the missing payments over that additional period. If you have had a sustained reduction in income and are unable to afford your regular monthly mortgage payment, you may be eligible for a loan modification which changes the terms of your loan to enable an affordable payment. Finally, another option available to homeowners is Chapter 13 bankruptcy either with or with loss mitigation.
Using Chapter 13 Bankruptcy to Repay Missed Mortgage Payments
A Chapter 13 bankruptcy filing can enable debtors to repay their past due mortgage payments over a 60-month payment plan that is interest-free. While mortgage servicers may turn down less that the full amount owed after a forbearance, they cannot turn down the Chapter 13 payments. They must accept monthly payments toward repayment of the amounts owed on the mortgage. Additionally, the Bankruptcy Court may offer a loss mitigation program to encourage home retention which enables homeowners to apply for and potentially obtain a loan modification. A successful loan modification in the Bankruptcy Court’s loss mitigation program is often a homeowner’s best chance to retain their property when the debtor is unable to afford a Chapter 13 payment plan with a large forbearance balance.
While foreclosures were suspended during the early days of the Covid-19 pandemic, the courts in New York have resumed operations and many hearings are now being held virtually. Please note, there are no foreclosure sale dates being issued right now, but the New York State Courts have resumed having conferences and hearings on motions regarding foreclosure. A Chapter 13 Bankruptcy may be the best option for a homeowner who is not eligible for the repayment options listed above.
If you have any questions about a forbearance or have been denied a forbearance, you should speak with an experienced NYC bankruptcy attorney. The Law Offices of David Pankin, has been helping homeowners throughout New York & Long Island with mortgage problems for over 24 years Please feel free to contact our office at 888-529-9600 or by using our easy online contact form.
How to Tell Who Owns Your Mortgage:
New York State Department of Financial Services: https://www.dfs.ny.gov/consumers/coronavirus/mortgage
U.S. House of Representatives Committee on Financial Services: