10 Jun What happens to my mortgage if I can’t get work?

Q. I’m currently deferring making my mortgage payments because I lost my job because of COVID-19. I know the loan will be extended for three months. But if I still don’t have a job, when would I have to worry about foreclosure? How does that work?
— Unemployed

A. We’re sorry to hear this is a hard time for you financially.

The time limits for mortgage forbearance — the suspension of mortgage payments — depends on whether or not the loan is backed in some way by the federal government.

For many homeowners whose income has been reduced due to COVID-19, lenders can give you up to one year to get back to work and start paying your mortgage, said Bruce Levitt, a bankruptcy attorney with Levitt & Slafkes in Maplewood.

However, this is not true for all homeowners.

Levitt said roughly two-thirds of all mortgage loans are owned or backed by the federal government. The most common of those loans are FHA, VA, Fannie Mae and Freddie Mac.

“Under the CARES Act, which was signed into law on March 27, 2020 in response COVID-19, lenders involved with these types of loans can give an initial forbearance of up to 180 days,” Levitt said, noting that lenders were automatically giving 90 days. “That time can be extended for up to an additional 180 days if the hardship has not been eliminated.”

For those homeowners that received an initial 90 days of forbearance, they must reach out to the lender to request more time, he said.

The remaining mortgages are held by private banks, state backed institutions or other entities. The CARES Act does not apply to loans held by those institutions, he said.

“While most of these lenders are giving an initial 90 days of forbearance, each of these lenders have the right to decide if additional time will be granted,” Levitt said. “It is important for homeowners to contact their lender before the initial 90 days runs to see if an extension is available.”

For homeowners who find themselves with a mortgage payment due and no ability to pay, foreclosure is a possibility, he said.

“While the New Jersey courts are not currently issuing foreclosure judgments and sheriff sales are on hold while we remain in a state of emergency, foreclosure cases can and are being filed in this state,” Levitt said. “Foreclosures do take time and there may be relief available. It is best to seek advice from an attorney, legal services agency or housing counselor if foreclosure appears to be imminent.”

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This story was originally published on June 10, 2020.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.