Lackluster New Mortgage Aid is Not Enough to Stave Off Mass Foreclosures
On July 31, 2021, the national moratorium on foreclosures expired. These provisions were put in place by the CARES Act introduced by Congress in the wake of an international pandemic that caused a significant economic downturn and spurred a wave of massive layoffs. Many homeowners turned to forbearance agreements with their mortgage lenders to buy some time until they were able to resume work or find new employment. However, due to numerous factors many homeowners are still out of work or can not make up their high forbearance balance.
Biden’s New Mortgage Assistance Plan
To help curb a wave of mass foreclosures, the Biden administration has announced new loan modification options for homeowners with federally backed mortgages, such as mortgages through the Department of Housing and Urban Development (HUD), Department of Veterans Affairs (VA), and Department of Agriculture (USDA). These modifications are aimed to allow homeowners with government-backed mortgages to reduce their interest rates and extend the life of their loan. The White House is promising eligible homeowners with these loans a “roughly 25%” reduction in mortgage payments. Additionally, the FHA is requiring mortgage servicers to allow eligible homeowners to resume their current mortgage payments at no cost.
While these new assistance programs will help individuals and families get back on track with their mortgages, these programs are designed only for those with federally-backed mortgages. Those who obtained mortgages through their bank or other privately owned entity are not entitled to these programs. With the foreclosure moratorium lifted and no further assistance provided by the current administration, what are struggling homeowners to do?
Can a Chapter 13 Bankruptcy Really Help Me?
Many homeowners who are significantly behind on their mortgage turn to Chapter 13 bankruptcy. A Chapter 13 bankruptcy reorganizes your debts and allows you to pay your creditors in a structured monthly payment plan which can include your ongoing mortgage and past due payments, or arrears, as well as other debts such as taxes, vehicle payments, and unsecured debts (credit cards, medical bills, etc.).
Upon filing a Chapter 13 bankruptcy, your estate receives what is known as an “automatic stay.” The automatic stay orders your creditors to immediately cease collection actions, including foreclosure. From there, you will be required to pay off your monthly mortgage, mortgage arrears, and required debts through a 3 to 5 year Chapter 13 repayment plan. In some cases, 2nd and 3rd mortgages or other liens can be removed entirely, depending on the amount of (or lack of) equity in your home and your eligible exemptions.
An experienced bankruptcy attorney will be able to formulate a low cost plan that will allow you to save your home from foreclosure and earn your financial freedom. Through my 19 years of practicing bankruptcy, I have helped countless individuals and families save their homes through Chapter 13 repayment plans. I am offering free consultations for those in the Sacramento area who would like to know more about how Chapter 13 bankruptcy can help them receive the relief they need. If you are facing mounting mortgage debt or have already received a Notice of Default or Notice of Foreclosure on your home, call my office today at (916) 392-6591 or fill out a contact form here.