Relief For Homeowners
In March 2020, the American government passed the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act. In addition to stimulus payments made to taxpayers to help offset the personal financial impact of the Coronavirus pandemic, the Act included relief for homeowners.
Homeowners with federally-backed home loans can drop their monthly payments for up to twelve months without penalty. While this seems like a great option for individuals who own a home, there is a caveat — no provisions were made for what repayments should look like once the forbearance ends and mortgage lenders have no guidelines on how to fairly recoup that money.
Are Homeowners Being Asked to Make Balloon Payments?
A balloon mortgage is a type of home loan that starts out with low monthly payments that eventually increase over time. It’s typically not seen as a good option for prospective homeowners with good credit and is reserved for would-be homeowners with less-than-perfect credit.
Unfortunately, many of the federally-backed home loans that have been put on forbearance due to COVID-19 are quickly resembling balloon mortgages. Lenders are asking homeowners to begin making lump sum or balloon payments once the forbearance period ends in an attempt to “catch up” on payments that weren’t made during times of financial hardship.
The Problem with Lump Sum Payments After Forbearance
Even after the forbearance period ends, the economy will still continue to be affected by COVID-19. There’s very little information available currently to let people know how long social distancing measures should remain in place or when a vaccine will be available. Even after that, the economy will likely take a long time to recover and many people may not get their jobs back.
The problem with lump sum or ballooned payments after a period of forbearance is that homeowners are still unlikely to be able to make their normal monthly mortgage payments, let alone three to four months’ worth of payments at a single time.
How to Get Help with Balloon Mortgage Payments
After a Forbearance
If you’ve obtained a mortgage forbearance under the CARES Act and are now being asked by your lender to double or triple your payments to make up for lost time, there are legal options available to you. Orlando bankruptcy lawyer Stephen Caplan can help you discover ways to manage your mortgage payments and can also support you when facing other types of debt. Contact our office today for a consultation at (407) 543-1801.