Plan Now for the End of Moratoriums

Key Takeaways
  • Moratoriums provide short-term relief by preventing landlords and mortgage servicers from evicting or foreclosing on your home.
  • The effect temporarily eliminates the consequences of missing housing or utility payments.
  • A moratorium is not debt forgiveness. You must have a plan in place to catch up with the account when the suspension ends.

Moratoriums temporarily suspend financial obligations due to financial hardship or event. Government, regulators, or businesses have the authority to issue suspensions.

In 2020, the federal government issued a nationwide moratorium on evictions. It has since been extended several times and currently ends on June 30, 2021. The ruling applies to individuals earning less than $99,000 and couples with less than $198,000 in annual income. To qualify, you must declare that you meet the requirements, but no proof is necessary.

The CDC also included a moratorium on foreclosures for mortgages backed by Fannie Mae and Freddie Mac through June 30, 2021.

Because of the vastness of the pandemic, states also offered protections that could expire later than the federal order. In some cases, the moratorium extended to other services such as utility shut-offs.

During a moratorium, you can miss payments without the traditional consequences of an eviction or foreclosure.

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What Happens When Moratoriums End?

The challenge is that moratoriums do not cancel the debt or provide payment assistance. It only prevents the landlord, mortgage servicer, or utility from exercising their right to cancel services or repossess the property while the order remains in place.

When the moratorium ends, you must pay the debt in full. The result could be owing thousands of dollars that become immediately due. If you took advantage of the moratorium for the full 18 months and owe $1,000 a month in rent, you would need to pay $18,000 to prevent an eviction or foreclosure.

Moving without making good on the debt could result in a judgment. With a judgment, the creditor can garnish wages, and in some cases, seize bank account balances or place a lien on your property. In a foreclosure, the bank takes possession of your home.

Planning for the End of the Moratoriums

Having a limited time to pay up to 18 months’ worth of housing or utility bills could be financially impossible. If you are in arrears, it is best to start planning how you will deal with the amount owed.

Here are four ways you can prepare financially for the end of the moratoriums:

Look for Deferral Payment Options. Mortgage servicers offer additional ways to catch up on accounts in forbearance. You can pay a lump sum, spread the late payments over 12 months (in addition to the monthly mortgage payment), defer the balance to the end of the loan, or modify the debt.

Contact Your Lender to Spread Late Payments Over Time

Most landlords and utility companies will work with tenants to repay the debt. However, this option will require you to resume your regular monthly payment and catch up on the delinquent balance.

Ask for Concessions

In some cases, the utility company, landlord, or mortgage servicer could agree to accept less than you owe. Concessions might include waiving late fees, removing penalties, or forgiving debt.

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Seek Help from Local or State Agencies

Congress allocated money for rent, mortgage, and utility relief in the stimulus packages. The December 2020 stimulus bill included 25 billion in assistance. Recipients can use the money to pay back rent, delinquent mortgages, or past-due utilities. The March 2021 bill added $21.6 billion in rental assistance, and homeowners received 10 billion to help avoid foreclosure.

The help comes in the form of grants to cities and localities across the country.In most cases, you can receive enough to cover up to 12 months of back payments. Tenants must apply through state and local relief organizations. Landlords can apply for help, provided the tenant signs off on the application. Local governments distribute the money on a first-come,first-serve basis.

Rethink Your Budget to Accommodate Higher Payments

Reevaluate your budget to cut spending, giving you enough room to make the higher monthly payments.

Bringing housing and utility bills to current status takes priority but could leave you with little for other accounts, like credit card payments. If you find you cannot pay all your bills, you might qualify for a debt settlement program, which allows you to pay off credit card debt for less than the total amount owed.