Navigating the End of Forbearance: Your Path Forward When Mortgage Relief Comes to a Close in New York
As 2024 unfolds, many New York homeowners who received mortgage forbearance during the COVID-19 pandemic are approaching critical decision points. During the COVID-19 pandemic, many New York homeowners took advantage of state or federal forbearance programs under the CARES Act, which allow pauses in mortgage payments. Now, as New York and the nation recover from the pandemic, those homeowners may wonder what options they have for paying their mortgage when exiting forbearance. Understanding your exit strategy options is crucial to protecting your home and financial future.
Understanding Your Forbearance Exit Options
When your forbearance period ends, you have several pathways forward, depending on your current financial situation and loan type. There are generally four options for mortgage holders exiting forbearance: Repayment plan. Each option is designed to help you transition back to regular payments while addressing the deferred amounts from your forbearance period.
Repayment Plans: If you can afford to pay more than your regular mortgage payment, a portion of the amount you owe may be added to your monthly mortgage payment until the total is repaid. This option works best for homeowners whose financial situation has improved since entering forbearance.
Payment Deferral or Partial Claim: If you can resume regular mortgage payments but can’t afford to increase them, your missed payments may be deferred to the end of your loan or put into a subordinate lien repayable when you refinance, sell, or terminate your mortgage. This creates a non-interest bearing balloon payment that becomes due at loan maturity or property sale.
Loan Modification: If you cannot afford your regular mortgage payment, the payment may be reduced, with your missed mortgage payments to the loan’s principal. This option permanently restructures your loan terms to make payments more affordable.
Reinstatement: Reinstatement (lump sum) – if you can pay all your missed payments at once. Note: if your bank requires a lump sum payment, you have the right to ask about other options.
New York State-Specific Protections
New York homeowners benefit from additional protections under state law. If your loan is covered by New York Banking Law 9-x, your servicer must offer you three repayment options: (1) to extend the term of the loan for the length of the forbearance without additional interest or fees, (2) to establish a monthly repayment plan in addition to your regular monthly payments for the remaining term of the loan, or (3) to negotiate a loan modification that ensures affordability.
Only if a loan modification cannot be agreed upon, the servicer will offer to convert the deferred amount to a non-interest-bearing balloon payment, payable when your loan term ends or upon refinancing or sale. This state protection ensures that New York homeowners have meaningful alternatives to lump-sum repayment.
Federal vs. State Programs: Know Your Rights
Your exit options depend significantly on whether your loan falls under federal or state jurisdiction. The federal CARES Act provides forbearances (temporary payment suspension) for homeowners with federally-backed mortgages, whereas New York’s Banking Law 9-x provides forbearances for privately-owned, non-federally-backed mortgages serviced by a New York State-regulated company.
For federally-backed loans, including FHA, VA, and USDA mortgages, specific programs are available. If you have a HUD/FHA (Federal Housing Administration) loan, you’ll be assessed for eligibility for FHA’s COVID-19 Recovery Standalone Partial Claim home retention option by the end of the forbearance period. This is a deferral program that places amounts you owe into a subordinate lien.
Taking Action: Essential Steps for Success
Proactive communication with your mortgage servicer is critical. You should contact your servicer well in advance of the end of your forbearance to discuss repayment options, which will vary but may include repayment plans and loan modifications. Don’t wait until the last minute – early engagement provides more options and better outcomes.
If you’re struggling to navigate these options alone, professional help is available. Housing counselors approved by HUD can provide free assistance, and legal professionals specializing in mortgage issues can offer crucial guidance during this complex process.
When Professional Legal Help Becomes Essential
Some homeowners may find themselves in situations where Foreclosure Prevention becomes a critical concern. Complex cases involving multiple missed payments, disputes with servicers, or unique financial circumstances often require experienced legal representation.
The Law Offices of Ronald D. Weiss, PC, serving Long Island, Brooklyn, and the greater New York area, has been providing expert bankruptcy and foreclosure defense services since 1993. With over 30 legal professionals on their team and a focus on compassionate, customized solutions, they understand the challenges New York homeowners face when transitioning out of forbearance.
Looking Ahead: Preparing for Long-Term Success
Successfully exiting forbearance isn’t just about choosing the right immediate option – it’s about setting yourself up for long-term financial stability. Government Assistance Programs: Continued government support in the form of mortgage relief, forbearance, and loan modification programs can help struggling homeowners avoid foreclosure. Extending or creating new programs to support homeowners who are facing economic hardships due to risinginterest ratesor inflation would be a key measure.
Consider your household’s financial trajectory when selecting an exit strategy. If your income has stabilized or improved, a repayment plan might work well. If challenges persist, deferral or modification options may provide the breathing room needed for recovery.
Don’t Navigate This Alone
The transition out of forbearance represents a critical juncture for New York homeowners. With proper planning, understanding of your options, and professional guidance when needed, you can successfully navigate this transition and maintain homeownership. Remember that For most loans, servicers cannot require you to repay your skipped payments in a lump sum once the forbearance period ends. So, if you only hear about a lump-sum repayment, ask about other options.
Whether you’re dealing with federally-backed or state-regulated loans, multiple exit strategies exist to help you transition back to regular mortgage payments. The key is understanding your rights, communicating early with your servicer, and seeking professional help when the situation becomes complex. Your home and financial future are worth the effort to get this transition right.