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Hurricane Harvey and Your Mortgage

Due to a damaged house, loss of work, or simply flood restoration expenses, many people have been unable to stay current with their mortgage payments. Most mortgage companies have offered disaster relief in the form of forbearance or mortgage modifications. Unfortunately, this relief often falls short of the real help that is needed. Let’s take a look at it.

This first thing to understand is that any such relief is completely voluntary on the part of the mortgage company. No law forces them to act in any way to resolve the financial burden left by Hurricane Harvey. What each company actually does offer varies by mortgage servicer and the actual holders of the loans.

Many homeowners were offered forbearance on their mortgage payments. A forbearance is where the mortgage company offers to “forbear” or hold up on collections. Ditech Mortgage has offered a October-March forbearance with the missed payments being rolled back into the loan. The homeowner simply has to renew making current payments when the forbearance expires.

On the other hand, Wells Fargo offered three month forbearance to their mortgagors. For that three months, Wells Fargo would not pursue payments or report to credit bureaus. Unfortunately, once the three month period elapsed( at the end of November) all missed payments became due. It is either pay up, get a loan modification, or face foreclosure. Of course, the problem is that the financial effects of Harvey are still being felt. The vast majority of homeowners have no way of making up three missed payments plus current payments. What are the options?

  1. Mortgage modification is a situation where a mortgage company voluntarily agrees to change the terms of a mortgage to ease the financial burden on a homeowner. Again, there is no law giving anyone a right to a mortgage modification. Mortgage modifications are information intensive and take 6 months or more. Homeowners are often advised not to make payments during this time as it will change the numbers being considered. The result is that if the modification is denied ( and a high number are denied), the homeowner is desperately further behind.
  2. Foreclosure in Texas is typically non-judicial. A mortgage company does not have to go to Court to get permission. The main exception is home equity loans. Those entail a lawsuit. For non-judicial foreclosures two notices are sent. The first is a 21 day Notice of Acceleration. The second is the actual Notice of the Foreclosure Sale at least 20 days after. Foreclosures in Texas occur only on the first Tuesday of the month between 10 AM and 4 PM at the County Courthouse.
  3. Is there any help to stop this process? Yes, After review by an experienced attorney, A Chapter 13 bankruptcy can stop foreclosure and arrange for mortgage arrears and other debt to be paid over 5 years. The homeowner remains in the house while the process is worked out.