As your clients look for encouragement, ways to keep spirits high and tips for cutting expenses, your expertise is vital. As a fiduciary, you can help them navigate the complexities of a new normal, especially if financial hardships are a reality and they are at-risk of losing their home due to an inability to pay their mortgage.
Before approaching this conversation with your sphere, it is crucial to come from a place of contribution, care and sensitivity. Offer up resources, avoid assumptions and simply let them know you are available to support in any way you can. Start by sharing the measures we’ve outlined below from the Consumer Finance Protection Bureau and downloading this client communication kit complete with a script and social messaging to help you discuss this important topic.
Download the KitThere are several mortgage relief options for clients who are at-risk of foreclosure.
1. Forbearance
A mortgage forbearance is an agreement made between a lender and a borrower to suspend or reduce payments for a specific period of time as they strengthen their financial situation. Under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, homeowners who are experiencing financial hardship directly or indirectly because of the national emergency, are entitled to forbearance for 180 days (and additional protections) if they have a federally or Government Sponsored Entity-backed mortgage. If your clients are unsure or do not believe they qualify for mortgage forbearance under the CARES act, they should not be deterred. It’s important they call their lender right away to discuss this option.
2. Reinstatement
Forbearance does not mean loan payments are forgiven or eliminated. When the forbearance period concludes, your clients will have to pay back the debt they have accrued during the period. When they pay this debt back in one lump sum, it will result in the reinstatement of their original mortgage loan terms; this is the fastest form of forbearance repayment. The other option they can discuss with their lender is a repayment plan; their lender will be fully-versed on these options and can discuss which would make sense for their particular situation.
3. Repayment Plan
With repayment plans, lenders allow borrowers to gradually pay back any debt incurred during a forbearance period by increasing the borrower’s monthly payments until the additional debt has been repaid. Repayment plans vary from loan to loan.
4. Loan Modification
If the reinstatement or repayment is not feasible for your clients, their lender may be willing to amend their mortgage in another way. The Consumer Financial Protection Bureau has more information on various loan modification options, as well as other helpful advice like how to avoid coronavirus-related scams.
Related reading: Coronavirus-Related Scams are Here: How to Protect Yourself and Your Clients
Emphasize that while renegotiating their mortgage loan with their lender may sound daunting, it’s important to act quickly to keep missed payments from getting out of hand and to reach out if they need guidance or a confidence boost before making the call.