Thousands of North Carolina Homeowners Failing to Take Advantage of Forbearance Assistance to Help Avoid Foreclosure

Published Thursday, October 29, 2020 at 10:21 am

Homeowners must request forbearance relief from mortgage servicers by December 31

Nearly 10 percent of North Carolina homeowners with mortgage loans insured by the Federal Housing Administration, a loan program that provides assistance to low-and-middle-income home purchasers, are “seriously delinquent” on their mortgage payments, according to recent data from the U.S. Department of Housing and Urban Development (HUD).

While the federal CARES Act allows these homeowners to obtain a forbearance—a temporary suspension of the obligation to make monthly mortgage payments— thousands of borrowers are not currently availing themselves of this forbearance relief and are therefore at risk of losing their homes to foreclosure, the data also showed.  

The CARES Act, passed by Congress and signed by President Trump on March 27, 2020, includes a provision that entitles homeowners to request forbearance from their mortgage servicer if they have a COVID-19-related hardship. If the homeowner makes the request, the servicer must provide a forbearance of up to 180 days. The CARES Act also allows the homeowner to obtain an extension of the forbearance for up to another 180 days, potentially allowing for a full year of protection. This relief is available even if the homeowner was already in default on their mortgage.

Critically, however, homeowners must request forbearance relief from their mortgage servicers—the relief is not automatically applied if a loan goes into default. South Carolina Representative James E. Clyburn recently obtained data from the Federal Housing Finance Agency (FHFA) that oversees Fannie Mae and Freddie Mac showing that 31,000 homeowners who are seriously delinquent on their mortgage loans have not obtained forbearances. The data suggest that homeowners with lower incomes are less likely to obtain forbearance relief than homeowners with higher incomes.

Homeowners with federally backed loans, such as FHA-insured loans and Fannie and Freddie loans, are currently protected from foreclosure by a moratorium that has been extended until December 31, 2020. Once the moratorium expires, homeowners with seriously delinquent loans will be at immediate risk of losing their homes to foreclosure.  

“By reaching out to their mortgage servicers sooner rather than later, these homeowners could protect themselves from foreclosure for up to a year, giving themselves time to improve their economic situation,” said Jason Pikler, Staff Attorney at the NC Justice Center. “While the missed payments must eventually be paid back, servicers are prohibited from adding fees to the amount owed and cannot require the payments to be paid off in a lump sum.”  

Last week, HUD issued guidance to mortgage servicers that extends the deadline for borrowers to request the CARES Act forbearance on FHA-insured loans from October 30, 2020, to December 31, 2020. While that gives North Carolina homeowners some breathing room, homeowners who are already delinquent or at risk of becoming delinquent on their mortgage payments should not delay in contacting their mortgage servicers to request a forbearance.

 

 

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