Be Careful With Mortgage Forbearances!
Good Afternoon! I hope this email finds you and your family doing well. For this newsletter, I'd like to focus on mortgage forbearances and offer some suggestions for protecting yourself if you need to apply for a mortgage forbearance during the COVID-19 pandemic. The Mortgage Bankers Association reported this week that almost 7 percent of all American homeowners with a mortgage are on a mortgage forbearance plan. What do we mean by "forbearance"? A mortgage forbearance can take different forms but typically it is when your lender temporarily suspends your monthly mortgage payments. The most important issue, though, is when the suspended payments have to be paid back. Let me provide an example. Let's say you have a mortgage on your home (payments are $1,500 per month) and you were laid off due to the COVID-19 pandemic. Your mortgage is not backed by Fannie Mae or Freddie Mac. You call your mortgage lender and explain what is happening, and ask for help. Your lender says not to worry and promises to suspend your payments for the next 90 days. You are relieved and thank them for the assistance. About 90 days later, you receive a mortgage statement in the mail, stating that you now owe $6,000.00 to the lender (the 3 "suspended" payments and the next payment due). You start to panic and call the lender right away. The lender explains that you must pay this amount right away or you will be in default on your mortgage. Now, you are at risk of foreclosure and you believe that you were tricked. In our law practice, we encountered this scenario frequently after Hurricane Irma and I am afraid it is going to be even worse with the COVID-19 pandemic. So, if you need a mortgage forbearance, how can you protect yourself? If your mortgage is not backed by Fannie Mae or Freddie Mac and you are approved for a forbearance plan, ask your lender when all of the missed payments need to be paid. If the lender asserts that the missed payments will be forgiven or put to the back-end of the loan, ask the lender to send you a letter confirming this agreement. If your lender makes an excuse for not confirming the agreement in writing, you should think very hard about whether you should take the forbearance. If you are in a serious financial bind, perhaps you don't have much of a choice but keep in mind that it could expose you to default and foreclosure. If you end up in default after a forbearance agreement, the mortgage company's lawyers may be able to argue that because there is nothing in writing where the bank agreed to place the suspended payments to the end of the loan, any promises made over the phone are not enforceable. Florida has a law called the Banking Statute of Frauds, which requires that any agreements related to banking be in writing or the agreement may not be enforceable. This can get complicated and you could have other arguments to challenge the foreclosure, but the central point is that anything promised over the phone needs to be confirmed in writing. If your lender will not put the agreement in writing, I would not trust what they are telling you. On the other hand, if your lender does send you written confirmation of your agreement, make sure to save this in a safe place. You may need it later to protect yourself. So what's different about mortgages backed by Fannie Mae and Freddie Mac?This week, the Federal Housing Finance Agency released new guidelines prohibiting lenders on Fannie Mae and Freddie Mac loans from requiring all suspended payments to be paid in a lump sum at the expiration of the forbearance. In other words, for these federally-backed loans, the lender must either put the suspended payments to the end of the loan or work out a repayment plan with the borrower. If your lender tells you that Fannie Mae or Freddie Mac will not allow this, they are not telling you the truth. You should consult with a qualified consumer attorney right away. Need to find out if your loan is backed by Fannie Mae or Freddie Mac? Click here for the Fannie Mae loan lookup tool and click here for the Freddie Mac loan lookup tool. We have also put all of this information in one central location. Just go to https://www.Coronalawyer.com and visit our Foreclosure Assistance section. To recap, if your mortgage loan is backed by Fannie or Freddie and you get a forbearance, your lender cannot force you to pay back all the missed payments in a lump sum. If your loan is not backed by Fannie or Freddie, make sure your lender backs up any verbal promises with a written agreement! If they won't do so, contact a lawyer right away! I hope this newsletter may be helpful to you and your family. I hope you all have a great day! Best Wishes, Ryan Torrens, Consumer Litigation Attorney
Disclaimer: The information provided in this email does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available in this email is for general informational purposes only.
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