What is COVID-19 Related Forbearance, and can it help me?
Forbearance— It is an agreement made between the mortgage servicer and a borrower who is experiencing financial hardship.
Forbearance IS NOT a payment waiver or payment forgiveness program.
Borrowers are being impacted by furloughs, lay-offs, less hours, reduced salaries, and lower demand of products that has reduced commission or bonus income. As the unemployment rate has skyrocketed with over 26 million people filing for unemployment in the last few weeks, We are receiving more questions about what the options are. We recommend that you contact an attorney and your lender to review what options are open to you during these unprecedented times.
First find out from you lender what options they can offer you, and consult with an attorney to help you determine what your best course of action is in choosing the best options to help you navigate your financial hardship.
Let’s review what we are being ask about often with the current stimulus program, and how it can help people that are facing issues in making their mortgage payment. The CARES ACT (The Coronavirus Aid, Relief, and Economic Security Act) provides some safety net for people during these difficult times, so what it is it?
Let’s start with what is Forbearance— It is an agreement made between the mortgage servicer and a borrower who is experiencing financial hardship. Forbearance IS NOT a payment waiver or payment forgiveness program. Participating in forbearance with your lender is not without consequences, which is why we day it provides “some” safety net. Mortgage forbearance provide temporary relief by allowing you to make lower monthly payments, or no payment at all, for a specific period of time but the interest still accrues and you will need to repay the amount of those missed or reduced payments.
When you contact your lender to determine what you are eligible for, ask your lender for the terms of your forbearance agreement. Terms can include:
The length of the forbearance period
The amount of payment required during the forbearance period
Whether the lender will report the forbearance to credit bureaus
How you’ll repay the lender after the forbearance period ends
Then consult your attorney to determine if this is the best option available to you. Remember, unless your lender has agreed not to report it, your forbearance will be reported to credit bureaus. In order to be eligible for a new home loan after forbearance — whether a refinance or purchase — you’ll need to re-establish yourself as a credible borrower.
“Most lenders would want to see you having made up the forbearance,” says Rocke Andrews, president of the National Association of Mortgage Brokers. In addition, Andrews notes, lenders will probably want to see 12 months’ worth of on-time payments following the forbearance
CARES Act Mortgage Forbearance: What You Need to Know
Click the image to link to more information available at the Consumer Financial Protection Bureau.
If you are ready to buy a home, and have questions about the changes to loan programs and availability, reach out to us and we can help connect you with a lender to review your options, and to review how we are changing how we practice real estate to keep you moving, while helping to keep you safe.
