Saving Your Home After an Economic Crisis
By FindLaw Staff | Legally reviewed by Robert Rafii, Esq. | Last reviewed March 19, 2024
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The spread of coronavirus made many borrowers concerned about paying their rent or mortgage. It's unknown when the next pandemic or economic crisis will hit. So, learning early on about saving your home is beneficial. With rising sale prices, interest rates, and inflation, economic uncertainties continue to plague homeowners.
Whether you're already seeing repercussions from losing income or are nervous about the future of your home, we outline the major issues below.
Foreclosure Changes During Crises
Paying your mortgage may be top of mind if your job is on the line. Under normal circumstances, a home loan has terms setting how many months you can be behind on payments before possible foreclosure. Often, it's four to six months before the lender can take action.
The Real Estate Settlement Procedures Act (RESPA) gives you time to find a solution with your mortgage company. There are also options for relief through most major mortgage companies. Often, payment plans or other deals can be worked out.
Under emergency circumstances, state governments can slow this timeline through foreclosure moratoriums to help residents. For example, in the wake of the last pandemic, many governors temporarily banned lenders from starting the foreclosure process. States like New York, Maryland, and North Carolina instituted foreclosure protections and forbearance programs to stabilize the housing market. Many mortgage loan lenders had to wait at least 90 days before bringing up foreclosure proceedings. Under COVID-related laws in multiple state jurisdictions, loan providers had to offer deferral periods to help homeowners catch up with repayment.
Even without government involvement, sometimes lenders might offer some grace. In the context of single-family residential foreclosures, they might forego charging late fees or reporting temporary delinquencies to credit companies. Other mortgage servicers may offer loss mitigation, such as special loan forbearance options that are tailored to your specific circumstances.
What Might Happen After a Crisis Is Over
Some people will still face foreclosure sales and eviction when a crisis ends. For example, when COVID-19 ended, many homeowners were suffering, even with government help or adjustments from their lenders. Statistics show that foreclosure rates evolved through and after the pandemic. After a crisis, people without jobs may still be struggling with financial hardships, causing foreclosure activity to increase.
A lender offering you a great deal may come with some unfortunate fine print. It's essential to know the terms of any mortgage relief deals, such as:
- Changes in interest rates
- Penalties for missing a payment
- Fees for late payments
- Timeline for payments
- Risks of still going to foreclosure
A housing counselor may be able to help you understand the terms of a mortgage relief deal for your residential property. They can help you go over:
- Pre-foreclosure filings
- Loan modification documents
- Mortgage forbearance terms
- Ways to lower your monthly payments
Pursuant to the U.S. Department of Housing and Urban Development (HUD) website, counselors are available to assist you in your state.
What You Can and Should Do To Help Avoid Foreclosure
Car loans, monthly bills, and home utilities can add to the stress. But alternatives to foreclosure are available. There are always laws and people who will be on your side as mortgage companies start looking for their payments.
You can start the resolution process by following these steps:
- Get a realistic look at your income, unemployment, job status, and other benefits or risks
- Reach out to your lender to explain your concerns
- Ask your lender to explain what mortgage payment relief options they are offering
- Read and understand your state's relief options
You may need to be able to show your job was lost due to no fault of your own. That includes government shutdowns, personal sickness or ailments, or natural disasters. Avoiding foreclosure is the best-case scenario. You need a professional to review your exact situation and all your options, including relief plans and unemployment options.
Cost of an Attorney During Foreclosure Fears
Using an attorney when money is already tight may seem counterproductive. But many may offer flat fee rates for contract reviews. Others could spend an hour or two on it at their hourly rate, which could vary. You can save on attorney costs by having the facts, dates, and paperwork ready before speaking to a lawyer. You can also ask to handle the back and forth with your lender to save money.
In the long run, a knowledgeable attorney can help you save money and avoid getting trapped in bad deals when avoiding foreclosure. Now is as good a time as any to reach out to a lawyer — many offer phone and video consultations. An attorney experienced in foreclosure may be able to buy you time and find solutions specifically intended for those in your situation.
Can I Solve This on My Own or Do I Need an Attorney?
- Many real estate processes can be handled on your own or with the help of a realtor
- Some tenant or neighbor disputes may need the help of local police
- Complex real estate issues (such as construction defects or illegal landlord actions) may need the support of an attorney
Buying or selling a home, facing foreclosure, or mortgage loan issues can benefit from legal expertise. An attorney can offer tailored advice and help prevent common mistakes.
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