Forbearance | Know Your Options...

We would like to extend our support and well wishes to you during these uncertain times. We are taking every precaution to ensure the safety and health of our clients and staff during the loan process from start to finish.

Mortgage Rates: After a highly volatile few months, rates have flattened and continue to remain at historic lows. Refinance market continues to be strong, but do shop around. Your individual rate will depend on your unique situation in terms of your credit score (FICO), home value and other risk factors. Contact us anytime for free no obligation quote.   

Forbearance: What we know at this time...so far there are about 3 million mortgages in forbearance – 5.6% of all mortgages in the US accounting for roughly $754 billion in unpaid principal. This could place a severe strain on mortgage servicers, who must make advance principal and interest payments each month to the bondholders on the loans they service, regardless of the loans’ forbearance status. The CARES Act legislation, which was passed to mitigate the economic impact of COVID-19, did not establish a liquidity backstop for loan servicers, nor did it require documentation of hardship.

Once approved for forbearance, borrowers are allowed to delay 3 payments without any negative hit to credit, but the full amount of unpaid payments are due at the end of the three months. If anyone is unable to make up the deferred payments, servicers/banks will reassess each borrowers’ individual circumstances and may consider extending forbearance. This is a “gray” area with no clear guidance. Some servicers may consider tacking on the deferred payments to the back of the loan and recasting the loan raising monthly mortgage payments, others may consider loan modifications and repayment plans, but the big question is, “How will it affect your credit profile?” Credit agencies may show these as “Forbearance” or “Loan Modifications” which will restrict the individual’s ability borrower in the future, just as we experienced during the 2008 recession.

For those who qualify for forbearance due to financial hardship, the long-term implications at the end of the three-month forbearance period is not clear and will likely depend on each loan servicer/bank. There is lot of misinformation out there, so if borrowers are considering forbearance as an option, it is best they talk directly to their loan servicers/banks.

Note: If a mortgage is currently in forbearance, lenders can’t refinance or qualify borrowers for a new mortgage until forbearance is resolved.