On August 25th, Texas was hit by the strongest hurricane to impact the state since 1961. But it wasn’t the wind that gusted to 134 mph that caused most of the $180 billion in damage; it was the catastrophic rainfall of up to 60 inches. All told, some 15,000+ homes were destroyed with another 150,000 suffering some damage.
Months later, the Texas coast is seeing a spike in delinquent housing payments with more than 40,000 mortgages that are 90 or more days delinquent. "The delinquency rate has almost doubled on a year-over-year basis," said CoreLogic chief economist Frank Nothaft. "That's a direct impact from Hurricane Harvey."
Following Harvey, most mortgage servicers reached out to borrowers offering various forbearance plans. Many homeowners took advantage of the “no payment for 90 days” offer - whether they needed it or not - without fully understanding what accepting a forbearance really means.
What a forbearance is (and more importantly, is not)
A forbearance is when a loan servicer chooses to allow a borrower to defer mortgage payments, put off foreclosure, waive late fees, and not report you to the credit bureaus. But the key word here is ‘chooses’ as there is no law that requires any of those allowances. So regardless of how much damage you suffered, you are still obligated to making your mortgage payment.
A forbearance is not an offer made from the kindness of the bank’s heart to allow you to skip three payments altogether!
As a real estate investor with multiple properties, I was the recipient of several calls from different mortgage companies, all encouraging me not make a payment – even though I was current, had no flood damage, and really didn’t need the candy they were so freely handing out. One was particularly aggressive. It was like the rep was incentivized to get me to stop paying! Doesn’t make sense, except he is with Wells Fargo and I wouldn’t put it past them to pay bonuses given their track record of unethical practices.
Sure, forbearance plans probably helped a lot of homeowners who needed a chance to catch their financial breath while collecting funds from insurance and FEMA. But most I’ve talked to accepted the offer without reading the fine print. Now they owe four mortgage payments and their financial windfall has turned into an albatross. Perhaps late penalties were waived and hopefully credit was suspended too, but unless you were one of the few who received enough proceeds to cover your loses, you are now in default. You’re actually 120+ days in default, and foreclosure is coming for you – fast!
I accepted a forbearance, now what?
If you accepted a forbearance plan, you need to know exactly what was offered. Find the letter from your servicer or call them to find out:
- How many month’s payments can be postponed?
- What fees, if any, are being imposed during and after the forbearance period?
- When am I expected to start making payments again?
- Will the deferred payments be due all at once, or over time?
- Are you reporting missed payments to the credit bureaus?
- What if I can’t repay the deferred payments all at once?
Get these answers in writing if possible. If obtained by phone, make sure you write down the date/time of the call and who you talked to, or better yet record the phone call using a free service such as Google Voice. Help is available, but watch out for scams.
If you can’t repay what you are behind, you will be placed in foreclosure. To find out more, read the Foreclosure Process in Texas. Quick action is needed to avoid losing your home! You may be eligible to apply for a loan modification, short sale, deed in lieu of foreclosure, or other loss mitigation option.
If you have any questions regarding your forbearance plan, the foreclosure process, or how to resolve your situation, The Lane Law Firm can help. Our passion is helping clients turn around their tough situations – just as we’ve done for hundreds of clients since 2009. We offer free, confidential consultations, so contact us today.