How to avoid foreclosure if you're in mortgage forbearance during COVID-19 pandemic
CHICAGO -- You may be one of about 3.5 million Americans already in a forbearance on your mortgage, but what if you need an extension? Or what if you want to start paying again?
"This is home, Villa Park is home to me," said Roger Feigenbaum. "I've owned this house since 1987 and I don't have any other place to turn to, this is my house."
Feigenbaum was laid off due to the covid-19 pandemic and is now fighting to stay in his home. He is in a reverse mortgage: the bank pays him for his equity in the home, but he can't afford the property taxes and home insurance.
As a result, his reverse mortgage company is forced to pay those fees and Feigenbaum could be at risk for foreclosure. He's now trying to get the lender, Reverse Mortgage Funding LLC, to help him out.
"So I was hoping to get some time of assistance, give me a little breathing, maybe a few months breathing room so I can gather enough money so I can go and make the payment next year sometime," he said.
Feigenbaum's attorney, Matthew Hulstein of Chicago Volunteer Legal Services, helped him apply for the forbearance under the CARES Act, which allows home owners to get a six month forbearance on federally backed mortgages.
"99% of reverse mortgages are FHA-insured reverse mortgages, it's a government program," Hulstein said. "I've never seen a reverse mortgage that's not federally backed. So, reverse mortgage, I think we can say almost across the board they're eligible, they're backed by HUD and by the FHA and the FHA has guidance telling servicers how to manage a forbearance."
Feigenbaum is still awaiting an answer from RMF in writing. He said he's unsure why a representative on the phone initially denied him help.
The I-Team reached out and sent his application and account information. The company responded: "For privacy and other considerations, Reverse Mortgage Funding cannot confirm or deny the existence of or discuss details of any consumer's mortgage."
Hulstein said his volunteer firm is also seeing potential denials to people who have inherited mortgages from family members who were already in foreclosure before the pandemic.
"We've had a few opposing councils say 'well I don't think you can get this forbearance while you're in foreclosure'. That's not true," he said.
If you're wondering if you qualify for a forbearance, your lender can tell you if your loan is among the approximately 70 percent of home mortgages which are federally backed.
Even if your loan is not federally backed, your bank may still be able to help you stay in your home by delaying payments.
"Even after you make the request I'd recommend if you both continue following up with their lender until they have something in writing saying that they're in forbearance and the length of the forbearance," said Hulstein.
If your forbearance is about to end after 6 months, you are able to extend it another 6 months under the federal CARES Act. If you're ending the forbearance, Hulstein said you "can take those missed payments that you didn't make during the forbearance and put them on the end of the loan."
You can also request a loan modification; a new loan term, possibly with lower interest rate.
"You could be eligible for a loan modification. And then they would take all of those missed payments and roll them back into your loan, it's called a recapitalization," Hulstein added.
Feigenbaum told the I-Team that days ago, a representative from his lender reached out to him and that he should now be getting the assistance he needs.
"I'd hate to move, so I am just being hopeful," he said.
The Mortgage Bankers Association's latest numbers show that forbearances have slightly decreased now to just under 7 percent mortgages in forbearance.
Experts say most banks do want to keep people in their homes and the majority of homeowners are getting help. If you are having trouble, getting approved.
