After Forbearance The Trap Homeowners Didn’t See Coming

Mia Arnold

Hey everyone, I’m here with our resident expert Don DeRosa and welcome back to Before the Auction. I’m Mia, and today we’re diving into something that’s honestly been on my mind a lot—the so-called ‘forbearance trap.’ If you or someone you know paused mortgage payments during COVID, this episode might hit a little close to home.

Don DeRosa

Yeah, absolutely, Mia. I mean, for a lot of folks, forbearance sounded like a lifeline, right? The CARES Act let millions of homeowners hit pause on their mortgage payments—no penalties, no late fees, just a breather while the world was upside down. But, and this is a big but, it wasn’t debt forgiveness. Those payments didn’t just disappear.

Mia Arnold

Exactly. And I can’t tell you how many people I talked to who thought, “Oh, I’ll just tack those missed payments onto the end of my loan.” But that wasn’t always the case. Some lenders wanted lump sums, some offered extensions, and honestly, a lot of folks didn’t really know what they were signing up for. I had a client—let’s call her Lisa—who was shocked when her forbearance ended and she got a letter saying she owed several months’ worth of payments all at once. She thought it would just… vanish, you know?

Don DeRosa

Yeah, and she’s not alone. Over 8.5 million people went into forbearance, and by early 2022, more than a million were still in those plans. There was just a ton of confusion about what would happen next. I think a lot of people just hoped for the best and didn’t get clear answers from their lenders.

Don DeRosa

So here’s where things got messy. When forbearance ended, a lot of homeowners were still struggling—maybe they hadn’t bounced back at work, or their expenses had gone up. Lenders sent out these options—lump sum repayment, partial reinstatement, loan mods—but not every lender explained things clearly. And the paperwork? Don’t get me started.

Mia Arnold

Oh, the paperwork. I mean, even for me, and I do this for a living, some of those letters are just… confusing. And if you’re already stressed, it’s easy to miss a deadline or misunderstand what you’re supposed to do. That’s how people end up in foreclosure, even though they followed the rules. I read a study from the Urban Institute—over 25% of borrowers coming out of forbearance were either delinquent or in some kind of loss mitigation. That’s a huge number.

Don DeRosa

Yeah, and it’s not just the forbearance ending. You’ve got inflation, job loss, property taxes going up, insurance hikes—just a perfect storm. I’ve had a spike in calls from homeowners who are just stuck. They’re staring at these letters, not sure what to do, and the clock’s ticking. It’s rough.

Mia Arnold

And let’s not forget, some people bought right before the market cooled, so they don’t even have much equity to work with. It’s like, every safety net has a hole in it right now.

Mia Arnold

So, let’s talk about what people can actually do if they’re in this spot. First, open your mail. I know it’s scary, but those letters from your lender—they’re not going away. The sooner you know what’s going on, the more options you have.

Don DeRosa

Yeah, and don’t be afraid to reach out for help. There are state relief funds, you can negotiate with your lender, sometimes you can recast your loan or even do a quick sale if you’ve got equity. And if you’re really in a bind, there are creative solutions like ‘subject to’ deals—where someone else takes over your payments. It’s not for everyone, but it’s an option.

Mia Arnold

And please, don’t feel ashamed. I just worked with a family who called me as soon as they got their first foreclosure notice. Because they acted fast, we were able to get a loan modification approved before things got out of hand. There are government and nonprofit resources out there—HUD counselors, legal aid, all sorts of stuff. You’re not alone in this.

Don DeRosa

That’s right. The worst thing you can do is nothing. Even if you’re embarrassed, just pick up the phone. There’s almost always something that can be done if you act early enough.

Don DeRosa

Now, if you’re listening and you’re not in trouble yet, but you’re worried, this is the time to get proactive. Start by really understanding your mortgage—read the fine print, know what your forbearance agreement actually says. Don’t just assume you’re in the clear.

Mia Arnold

And set up a communication plan with your lender. I know it sounds formal, but even just checking in every few months can make a difference. Ask about assistance programs, see if there’s anything new you qualify for. The more you know, the better you can plan.

Don DeRosa

And think long-term, too. If you can, look into refinancing or even just tightening up your budget. The goal is to build some cushion so you’re not caught off guard if things change again. It’s not always fun, but it’s worth it.

Mia Arnold

One thing I always recommend—find a local or online workshop about homeownership or financial literacy. There’s so much good info out there, and it can really help you understand your mortgage and your options.

Don DeRosa

And if you can swing it, start building an emergency fund. I know, easier said than done, but even a few months’ worth of expenses can make a huge difference if something unexpected happens. It’s like your own personal safety net.

Mia Arnold

And don’t forget to review your mortgage terms every so often. Interest rates change, loan programs change—sometimes you can refinance or modify your loan to get a better deal. It’s worth checking in, even if you think you’re set.

Don DeRosa

Another big one—connect with a housing counselor or a certified financial advisor. They can look at your whole situation and help you come up with a plan that actually fits your life, not just a one-size-fits-all solution.

Mia Arnold

And do a deep dive into your monthly expenses. Sometimes you find little leaks—subscriptions you forgot about, stuff you can cut back on. Every dollar you save is a dollar you can put toward your mortgage or your emergency fund.

Don DeRosa

And if your credit’s improved or rates have dropped, refinancing could be a game changer. Even a small drop in your interest rate can free up cash every month. Just make sure you understand the costs and the terms before you jump in.

Mia Arnold

And finally, don’t go it alone. There are local and online homeowner support groups where people share advice, resources, and just… encouragement. Sometimes just knowing you’re not the only one makes a huge difference.

Don DeRosa

Yeah, and look into government programs—FHA, VA loans, stuff like that. They sometimes have more flexible terms if you’re struggling. And there are community organizations that offer free counseling or even legal help if you need to negotiate with your lender or explore other options.

Mia Arnold

We’ll drop some links in the show notes—HUD counselors, the National Foreclosure Prevention Hotline, all that good stuff. If you’re listening and you need help, please reach out. You’re not alone, and there are people who want to help you find a way forward.

Don DeRosa

That’s a wrap for today. If you found this helpful, share it with someone who might need it, and don’t forget to subscribe so you don’t miss our next episode. Mia, always a pleasure talking through these tough topics with you.

Mia Arnold

Same to you, Don. Thanks for being here, everyone. Take care of yourselves, and we’ll see you next time on Before the Auction.