Real Estate News with Terri Taydus, GRI, CNA

FORBEARANCE SHOULD BE A LAST RESORT!

May 8th, 2020 4:11 PM by Taydus Taydus

 

The basic definition of forbearance, in the context of a mortgage process, is a special agreement between the lender and the borrower TO DELAY FORECLOSURE.

We have seen a rapid increase in the numbers of borrowers going into forbearance without any knowledge or understanding of what they are doing.

The mortgage companies are not explaining what forbearance is or what happens at the end of the forbearance period.  Many borrowers are being put into forbearance without any consent, verbal or written.

It is imperative to read and understand the following:

  •  At the end of the forbearance period one of three things happen
    1. A lump sum payment is due so if your mortgage is $1,500 per month you will owe $4,500 due and payable at the end of the three months
    2. The bank will agree to a repayment plan that is supposed to be no more than 6 – 12 months so the above borrower would have to pay an extra $750 per month in addition to his regular payment for six months
    3. The third option is that the missed payments will be added to the end of the mortgage term with no additional accrued interest

Based on my understanding, the borrower cannot select the terms of repayment and the bank will not commit to a plan at the beginning of the forbearance.  The terms will be decided by the bank and the preferred repayment plan is the lump sum.

The most important advice that I can give consumers is to take any correspondence be it written or over the telephone from your lender seriously.  Borrowers are being put into forbearance without any formal consent for the Bank to do so.

Once in forbearance, either by your choice or the Banks, your credit is ruined.  The banks are quick to report the forbearance to the credit bureaus and it immediately shows up on your credit even if you have not missed a payment.

The banks that we have experience with WILL NOT send a letter to the lender to have the forbearance removed.  The bank will at its leisure report that the borrower opted out of forbearance and did not miss any payments.

We have no idea how long this process will take as this is all very new.  Once the forbearance is taken off, you have to bring your mortgage current and make at least two payments as scheduled to eliminate the negative impact of the forbearance.

FORBEARANCE is serious and unfortunately many homeowners will be put into a position where they could lose their homes without even understanding what they are agreeing to.

Document your conversations regarding the forbearance and keep all documents that are sent to you.  Make sure that you respond to all correspondence and if you are notified that you have been placed in forbearance immediately notify the Bank that you wish to opt out.

You can ask your lender to do a SOFT PULL of your credit to make sure that the forbearance does not appear and if it does that it has been removed.  You need to act pro-actively and not wait.

If you cannot make your payment, then I would advise to try and pay what you can and not skip the payment entirely if possible.

As a company we are collecting as much information as we can through our legal department and our Credit Services to be informed and to help educate our clients as this is very new to all of us.

Written and shared with permission by Joe Taydus of NOVA Home Loans.  Please reach out to Joe directly with any questions: (303) 514-1151 or Joe.Taydus@NOVAHomeLoans.com 


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