
*As of April 20, 2020, Quicken Loans® isn’t offering conventional adjustable rate mortgages (ARMs).
Reinstatement
If you have missed payments in the past and are in a situation where you can make them moving forward, the way to get your mortgage back on track is what’s called reinstatement. This is a one-time lump sum payment of the full past due amount, along with any late fees and other penalties.
Mortgage Modification
If a challenge has caused you to fall a couple of months behind on your mortgage payment, one option your servicer will look into is a loan modification. The purpose of a modification is to lower your payment to the point that you can afford it. Your servicer will do this by changing one or more terms of your loan. This could include an interest rate reduction, loan term extension or forgiveness of a portion of the debt.
Mortgage Refinance
Much like a loan modification, a refinance can lower your payment with a new interest rate or loan term. However, a mortgage refinance involves getting a brand new loan, while a mortgage modification modifies the existing loan. Most loans will go through a traditional refinance; VA and FHA loans have their own types of refi.
VA Streamline Refinance
If you’re a veteran and have a VA loan that you’re struggling to pay off, you can refinance at a lower rate with a VA Interest Rate Reduction Refinance Loan (IRRRL). Also known as a VA Streamline, the IRRRL simplifies the refinancing process to ensure that you receive prompt financial assistance.
FHA Streamline Refinance
If you have an FHA loan, you can refinance with an FHA Streamline to lower your monthly payments. However, to qualify for this option, you must currently be in good standing with your mortgage. That means, in the last 6 months, you may not have made any payments that were more than 30 days late. And in the last year, you may not have made more than one payment that was more than 30 days late.
Mortgage Repayment Plan
A repayment plan takes the amount of the mortgage that is past due and splits that up over a few months in addition to your normal mortgage payment. You pay extra each month until the past due amount is satisfied.
Mortgage Forbearance
The remaining alternative, mortgage forbearance, is a temporary option that will not help you settle the delinquency on the mortgage, but it can help assist in the event you have a short-term hardship that is not yet resolved, such as unemployment, serious illness or a natural disaster.
Working With Your Servicer
When you contact your servicer to explain your situation and learn about your options, expect to answer a few questions about your hardship, your financial situation and steps you’ve already taken to try to resolve the issue. They may also ask for documents that prove your hardship, the actions you’ve taken to try to remedy it and the current state of your finances. It is also a good idea to have documents that show your otherwise exemplary history as a borrower (i.e. on-time payments).
Dealing With An Underwater Mortgage
For some homeowners, the issue may extend beyond having trouble with a monthly payment. It may be that they actually owe more on their home than what it’s worth. If this is the case for you, what you’re dealing with is an underwater mortgage.
Fannie Mae’s High Loan-To-Value Refinance Option
If your Fannie Mae mortgage is underwater but you’ve been making your payments on time, you may consider a High Loan-to-Value Refinance Option (HLRO). The HLRO enables homeowners who are struggling to refinance to obtain a lower rate regardless of whether they have equity in their home.
Freddie Mac’s Enhanced Relief Refinance
If your loan is owned by Freddie Mac, their Enhanced Relief Refinance can help you make your monthly payments more affordable. If you’re in good standing but have a high LTV ratio, the Enhanced Relief Refinance will enable you to lower your payments by reducing your mortgage rate, switching your adjustable-rate, interest-only or balloon mortgage to a fixed-rate mortgage or decreasing the term of your mortgage.
Options For A Managed Sale
The aforementioned options can be helpful solutions if you have the budget and want to stay in your home. If for whatever reason, you can’t make one work, then your servicer may consider working with you to sell the property. The following options won’t hurt as much as a foreclosure from a credit perspective.
Short Sale
If you know you’re struggling to make your mortgage payment and decide to sell your home, a short sale can help you leave your home gracefully with a smaller credit impact than you would see in a foreclosure. This may be the preferred option for clients who have no equity in their home.
Deed In Lieu
If you have very little equity in your home and just want the option to leave your home to the lender without having a foreclosure on your record, you can do so with a deed in lieu of foreclosure, which allows you to voluntarily sign your property’s title over to your lender. By working with a lender on your deed in lieu, you may be able to obtain some funds to assist in relocating to another living arrangement. While this may protect you from a formal foreclosure, it will still impact your credit.
Summary
If you find yourself facing financial hardship, remember that you do have options and contact your servicer right away. If you need more assistance navigating the situation, contact a mortgage expert to get your questions answered.