Know your options when forbearance ends

As the COVID-19 pandemic burned through the American economy throughout 2020, many Americans put mortgages and other loans into forbearance — a grace period that delays loan payments for a specified period of time, usually up to twelve months, according to Experian. And as the pandemic extends into a second year, that forbearance period is ending for some borrowers.

During the first seven months of the Covid-19 pandemic, mortgage delinquencies dropped from 3 percent to 1.8 percent. Much of the reason is President Trump’s CARES Act, which requires lenders to offer forbearance to borrowers. Many lenders who weren’t required to do that under the CARES Act still offered the option to borrowers. This was partly responsible for keeping the housing market out of a downward spiral. But forbearance is short-term and for many, it might be ending.

If your mortgage or other loan has been in forbearance, it’s critical to know what your options and obligations are in order to let you take the right next steps. According to Bankrate, there are three primary ways to wrap up a forbearance:

* A lump sum payment, in which you pay all the missed payments at once to catch up.

* A short-term repayment plan or modification, usually an additional monthly charge on top of your regular payment to bring you up to date.

* A loan modification to change the terms of your loan. A variety of changes are possible, such as extending the repayment period, lowering the interest rate, or reducing the principal loan balance.

Keep in mind that lenders cannot require a lump sum payment with no other options, according to The Motley Fool. Talk to your lender about other options if lump sum payment is not feasible for you. If you have a high enough credit score, you may have a number of choices at your disposal.

If you’re facing a mortgage crisis and want to avoid foreclosure, it’s important to talk to your lender about your options. Chances are that your lender wants to avoid foreclosure almost as much as you do, according to Bankrate.

For homeowners in truly dire straits who absolutely must sell, there is a silver lining — home values have skyrocketed over the last six months, with surging buyer demand and limited housing inventory, according to The Motley Fool.