The Covid-19 pandemic of 2020 brought on uncertainty throughout the world. The impending economic devastation shut the world down and skyrocketing unemployment put many people in complicated situations - especially when it comes to housing.
With household incomes in crisis mode, the government instituted several programs for tenants and homeowners to ensure they have a safe place to call home, regardless of their ability to pay. And so, many struggling homeowners entered into forbearance programs to delay their payments.
Forbearance is a term that is thrown around a lot today and has created some confusion amongst homeowners. But what is forbearance?
What is forbearance?
Forbearance is an agreement between a lender and a borrower to delay foreclosure while either paying less than the previously agreed payment or pausing payments altogether.
Although of great help to many people, there has been a lot of confusion and uncertainty on what will happen as these programs start to fade out. Since these programs are not loan forgiveness plans, many homeowners enrolled in forbearance programs are soon to be faced with the decision: pay up or get out. The moratorium on foreclosures is running out, and homeowners will have to find a way to work out individual programs with lenders, get caught up on payments, or sell.
What can you do to avoid foreclosure?
The great news is that homeowners that find themselves in situations where they must or want to sell, recent appreciation should allow them to sell without being underwater with their mortgage. In our recent post, we discussed some reasons why now may be the best time to sell. Suppose the escalating sales prices start to reverse. In that case, it will be critical for homeowners facing foreclosure to sell as soon as possible to hedge the risk of a declining market and risking their home value going below their loan price.
In short, if we were to see a market downturn, where home sale prices decrease, some struggling homeowners may lose the ability to sell and be forced into foreclosure. While the market is high, selling may save struggling homeowners from the devastating, lasting effects of a foreclosure.
Each homeowner’s situation and forbearance agreement may vary. While rescue plans may be on the way for some, homeowners should look carefully at their situation and seek guidance on what options they have.
Call us today or send us a message if you want to know what your options are.