You have likely heard about the mortgage forbearance programs recently put in place to provide relief to those who have lost income due to the COVID-19 pandemic. It is incredibly important that every American homeowner — including you — fully understands what these mortgage forbearance programs actually mean during this time of crisis.
The most important piece of advice I can give you regarding these programs is to pay your mortgage if you can. The forbearance programs you may have heard about under the CARES Act are intended for people who have experienced a direct financial impact from the coronavirus. If you have exhausted all options and cannot pay your mortgage, this is your last resort and it is available. This is not a stimulus “perk” or “benefit” giving all Americans a reprieve on their mortgage.
If you choose to utilize the forbearance option, please consider the following:
This program may impact future actions on your mortgage
If you choose to go into mortgage forbearance, it is important to understand that many lenders will not refinance that mortgage in the future. Depending on the lender, this could be contingent on paying the full amount of the forbearance period.
This is not free money
Mortgage forbearance must be repaid, and you must fully understand the terms. Different mortgage servicers are requiring different methods for reimbursement. These include but are not limited to:
- A lump-sum payment at the end of the forbearance period, plus accrued interest
- Dividing the lump sum up over a certain number of months, which will increase the monthly mortgage payment
- Adding the payments to the end of the mortgage
Contact your mortgage servicer to ensure you understand the terms before agreeing to anything.
Many different mortgage types exist
It is vital that you understand that the experience will be different based on the type of mortgage you hold. When the government mentions recommended actions that lenders take, this only applies to government-backed mortgages. The government has put out recommended measures for FHA, VA, USDA and FHFA (Fannie Mae and Freddie Mac) loans. Many private mortgage programs do not fall under those categories and do not follow the government-recommended measures. You need to know what kind of mortgage you have. Contact me if you are not sure of your mortgage type.
Be aware of your alternatives
Alternative options are available for you to explore before sacrificing your financial security. Those options include:
- Paying your mortgage with the stimulus payment recently issued by the federal government
- 401(k) usage under the CARES Act
- Debt consolidation
- Utilizing your home equity
- Scaling back nonessential services
If you have questions about any of these options, please contact me.
You must call
If you’ve exhausted all options and are still unable to make your mortgage payment because of a direct impact the pandemic has had on your financial situation, you must call the mortgage servicer to which you make payments. The mortgage servicer must then provide an approved agreement. You cannot simply skip your mortgage payments and expect you’ll be covered by forbearance. You could be foreclosed on, your credit could be impacted, and you may not be able to obtain a new loan at any time in the near future.
The bottom line
The more Americans we can keep out of forbearance, the more Americans there will be with strong financial outcomes. Industries will emerge from this pandemic stronger, and the bounce-back will be faster. But we all have to work together.
If you are experiencing difficulties during this time, please reach out to me so we can discuss all the options you have.
As the loan officer who originated your mortgage before it went to the servicer, I can provide professional and honest advisement specifically because we are not the servicing company. I want to see all of my clients come out of this in the best financial position possible.
Stay safe and healthy and please don’t hesitate to contact me with any questions.
