Bernice Ross

Anyone who was selling real estate during the Great Recession remembers all the foreclosures, short sales and bankruptcies that occurred. Now, COVID-19 has placed millions of homeowners at risk for losing their homes.  

If you know of anyone who is facing a mortgage crunch due to COVID-19, time is of the essence. The sooner they take definitive action to address their situation, the more likely they will be to successfully navigate through this difficult time.  

Failure to act quickly can have dire consequences including loss of any equity the owner may have in the property, a big hit to the owner’s credit score and higher costs on insurance, loans and credit cards.  

When a homeowner is facing a possible foreclosure, they seldom know what to do. Use your social media accounts, your print campaigns, digital marketing and any other means to let people know there is help available for those currently struggling to make their mortgage payments.  

This script is just as effective today as it was during the last two downturns. Use it in print, online, or by phone: “Do you know someone who is struggling to make their mortgage payment due to COVID-19? If so, there are resources available to help them avoid foreclosure and keep their home. Please contact me at (give your contact information) if you know someone who needs help now.” 

Lender Solutions 

Lenders can provide a wide variety of options to those facing a mortgage crunch but getting that help can be challenging. What’s unusual about today’s situation is that many lenders have voluntarily agreed to help distressed homeowners find a workable solution. In many cases, this involves putting the loan into forbearance.  

Forbearance is designed to help homeowners with hardships such as losing their job, health care costs or damage from natural disasters. The lender allows the homeowner to temporarily stop paying their mortgage or allows them to pay back the mortgage with a lower payment. The homeowner will have to repay any missed or reduced payments. Some types of forbearance include a pause with a balloon payment, a temporary reduction in the monthly payment and a step rate loan modification.  

HOPE NOW, part of the Consumer Financial Protection Bureau, is a nonprofit dedicated to home preservation. Formed in 2007 by the Department of the Treasury and the US Department of Housing and Urban Development, HOPE NOW was a tremendous resource for distressed property owners during the Great Recession. Today, they are helping distressed homeowners reach their mortgage servicers about beginning the forbearance process.  

For any homeowner seeking forbearance or any other type of loan modification, they must keep in mind that any error in the submission package will result in a denial. The lender may also charge fees for this service including a drive-by appraisal, title, escrow and recording fees. Borrowers may be able to roll these fees into existing loan balance.  

To obtain an objective assessment about the lender’s solution to the homeowner’s situation, homeowners can visit the CFPB’s “Find a Counselor” tool to obtain a list of HUD-approved counseling agencies. 

Any time a homeowner is considering changing the terms of their mortgage, the possible tax ramifications should be evaluated by their tax professional. 

Second, before signing your final loan documents, a homeowner should always obtain an agreement in writing about how this change will be reported on their credit report. If the lender reports their credit status incorrectly, the homeowner can give the credit bureau a copy of the letter. If that happens, the homeowner should also contact their lender to advise them of the error.  

Please take every possible step you can to help struggling homeowners obtain the help they need to work through their mortgage issues and keep their homes.  

Bernice Ross is a nationally syndicated columnist, author, trainer and speaker on real estate topics. She can be reached at bernice@realestatecoach.com.