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What is Residential Forbearance in Arizona? A Short Guide to Help Homeowners

Any homeowners that faced difficulty making their mortgage payments during the pandemic became familiar with residential mortgage forbearance. In essence, mortgage forbearance is an agreed upon suspension of payment obligations for a period of time. Forbearance does not remove the obligation to pay the mortgage or reduce payment amounts.

The CARES Act and additional Arizona programs provided government-backed forbearance programs for homeowners. We put together a short guide to help homeowners understand the options if they are looking to pursue a residential forbearance now.

Arizona Mortgage Forbearance Programs

Arizona has many resources for homeowners struggling to make their mortgage payments listed on the Arizona Department of Housing website. The agreement that involved Governor Doug Ducey and the mortgage providers in Arizona stated that the home foreclosure will not take place at least for the next 60 days (during the first wave of the COVID pandemic).

Not only were foreclosures and evictions delayed, but many banks and financial institutions extended the loan repayment time for businesses. They launched the payment-deferral system, allowing businesses up to 90 days to clear the payment.

The agreement stated that homeowners who applied for the home mortgage loans can get a forbearance of up to 12 months. However, that doesn’t mean every household in Arizona is included in the agreement. You may or may not be exempted from the mortgage payment depending on whether you qualify for the “federally backed mortgage” plan. Get in touch with your loan provider to know whether you are eligible for the residential forbearance in Arizona.

Options for Homeowners with Past Due Balances in Arizona

During the pandemic, borrowers simply requested an extension for the repayment of the mortgage due to the adverse effects of the pandemic. Arizona also introduced programs to assist with the ban on a home foreclosure or eviction of homeowners because of the non-payment or delayed payments of the loan during the pandemic. Earlier this year, the federal government offered protections to borrowers whereby they could request a six-month extension on forbearance agreements, if they qualified.

Before these programs in Arizona were introduced, there was a great concern among borrowers who were not in a position to pay back the loans. The government worked with moneylenders and mortgage providers in the region to develop programs that supports these borrowers and provides them relief until they are strong enough to get back on their feet.

More than 2.6 million homeowners in the world were part of the CARES Act option for residential mortgage forbearance, according to a press release that was published by the Mortgage Bankers Association. Homeowners likely have many questions about their current options. If you have requested forbearance on your payments and delay on any foreclosure action and have not received a response yet, here are your options:

Not everyone is eligible for forbearance relief. As mentioned earlier, only those who are impacted by the pandemic or those that are not in a financial position to repay the loan are given the relief.

  • A 12-month extension is provided to those affected by the pandemic for mortgage payments. Foreclosure is suspended during that time period. You must contact your loan service provider to know whether you qualify for this forbearance.
  • Homeowners need to pay the missed or delayed payments; however, the loan provider cannot force them to pay the past due balance in one lump sum. For most types of loans, the borrowers are given a few months of relief from the next mortgage payments, but they may have to continue to pay the same amount after the forbearance period is completed.
  • No late payment penalties are imposed. Borrowers are allowed to pay in small installments, but the normal interest will be accrued.

When do the Borrowers Need to Resume Payments on their Mortgage?

It is important to note that the relief from the foreclosure and eviction are temporary, and you need to resume your payments as the forbearance expires. You are given the mortgage forbearance if you qualify for the forbearance terms. For borrowers in Arizona, the relief is for 180 days, but you can extend the period to another 180 days if you are still unable to make mortgage payments.

If your mortgage meets the forbearance on foreclosure conditions, your lender will grant you an extension for the payments with no extra penalties, interest, and any hidden charge except for what’s applicable to your mortgage payments. As mentioned earlier, there are no late penalty fees for those who fall into this category.

The payments made upon the expiration of this forbearance period will be counted as normal payments. And it will not be reported to the credit bureau as a missed or late payment. However, if you are late on your payment after the expiration of the forbearance, it will affect your credit score.

The extension duration varies depending on the loan amount, type of loan, your financial ability, how much you are impacted by the pandemic, and your lender. Freddie Mac and Fannie Mae have advised each borrower to work with their mortgage service providers to establish a suitable repayment plan.

How Do You Request Forbearance?

If you are having a hard time paying your monthly mortgage payments, get in touch with your loan service provider NOW to know your options. You can use the tools developed by Freddie Mac and Frannie Mae to know if your mortgage is covered by the CAREs act as well as forbearance. For more information about your eligibility for the forbearance and the extension allowance, feel free to contact your loan service provider.

You will be asked to submit your name, four digits of your social security number, and address to the customer care representative. They will check the type of mortgage, its length, amount, and other details to decide whether or not your mortgage qualifies for forbearance.

Understand the Terms

It’s important to work with the loan service provider to understand the terms and conditions of the forbearance carefully. Some mortgages require you to make the full payment (in a lump sum) for all the missed payments as soon as the forbearance expires.

This can wreak havoc on your budget since most homeowners requesting a forbearance are not in a financial position to make a lump sum payment by the end of that time period. This is why you must negotiate a deal that makes sense for your situation with the lender and understand the terms clearly before requesting a forbearance. It is better if they accept higher payments after this period, allowing you to clear your dues over time instead of payment in a lump sum.

Work with an Experienced Arizona Real Estate Law Firm

If you default on your mortgage payments, your lender will likely pursue foreclosure as soon as possible. It is important that you contact a law firm that specializes in the Arizona foreclosure laws if you are unable to receive a residential mortgage forbearance that allows you to get caught up.

The attorneys at M&G Law can help review your mortgage agreement, your current financial situation and assist in negotiating a new agreement with your lender to get back on track. Contact our expert real estate attorneys today at 602-562-7218 to schedule an initial consultation or Make an Appointment Online.

Call us today at (602) 533-2840 for an appointment.