May 4, 2023 | Written by Michael Famiglietti
As the COVID-19 public health emergency comes to an end in the United States, those suffering from financial hardship due to the pandemic have until the end of May to apply for a mortgage forbearance. Those with federally backed loans, including FHA and USDA loans, have until May 31 to apply.
Many forbearances were granted since 2020, which allowed borrowers to pause or reduce their mortgage payments for a certain amount of time. The government requires all forbearance periods due to the pandemic to end before November 30. Once these forbearances end, borrowers have recovery options, such as partial payments or loan modifications.
Those without federally insured loans could have applied for forbearances through their mortgage servicers, and those options varied depending on the servicer.
These plans were put in place to reduce the chances of widespread default, which the county saw during the Great Recession from 2007 to 2009. The plan appears to have worked as the delinquency rate in the U.S. continues to decline, according to a report by CoreLogic posted by the Mortgage Bankers Association. The report reflects the current rate of 2.8 percent, which is down from 7.3 percent in early 2020.
As millions faced job loss or reduced hours from the pandemic, the forbearance options kept many people in their homes. But as these are phased out, those still out of work may face new hardships. Some may be able to sell their homes to pay off the loan, but higher mortgage rates continue to make it difficult to find a buyer in certain markets.
While it is unlikely the country will see foreclosure rates matching the Great Recession, an increase may be likely once forbearances end. Any increase could see new mortgage insurance claims or foreclosure schemes. Obtaining clear and credible interviews from the borrowers, either via video conference or in person, would help reduce fraudulent claims from being paid.
Confirming occupancy in person may also be vital when deciding to pay a claim or grant a modification. Frasco has investigators nationwide who can visit properties to interview borrowers and provide current descriptions of their homes. We can also authenticate a borrower’s employment, income, assets and credit through comprehensive reviews, public records and public record databases.
Our licensed investigators can provide lenders, insurance companies and agencies with timely information in changing times. Contact us at frasco.com/mortgageriskmitigation