The Covid-19 Coronavirus has led to some challenging times for all of us.
For homeowners and business owners, the US Government has created the CARES Act to assist those whose income may have been adversely impacted by the coronavirus.
One of the components of the CARES Act is the possibility of mortgage forbearance.
Please keep in mind that forbearance is designed to help those as a measure of last resort. It is not a free pass and may have serious consequences.
My advice is that if you can pay your mortgage, make sure and do it. This is not a time to try to take advantage of an untested program that might actually hurt you down the line.
Again, unless you are facing an immediate issue, pay your mortgage on time.
What is Forbearance?
Forbearance is often misinterpreted. And while it is intended to help, it can have some dangerous repercussions. Many people are mistakenly thinking that forbearance equals forgiveness. It does not.
To be clear, forbearance means that the payments will be suspended for a short period of time, initially up to 6 months, but will need to be caught up when the forbearance period is over.
I highly recommend that you go to the Consumer Finance Protection Bureau’s (CFBP) site here… their “Guide to Coronavirus Mortgage Relief Options” has s good deal of information and advice.
One way to think about forbearance is when you buy something at a furniture store that offers “no payments” for 3 months. You still must pay for the furniture…the payments are just deferred.
But mortgage forbearance is even worse if a borrower has dug themselves in a deep hole and can’t catch up. Should this happen, the lender could enforce their right to be paid, which may cause the borrower to be foreclosed upon. They could lose all the equity in their home in the process.
How The Process Is Working Today
What’s being reported is that lenders and servicers will require three months’ worth of payments – plus the current month – once that forbearance period is up.
Per Jessica Menton’s story the USA Today: “Some homeowners say Wells Fargo, Bank of America and Chase have told them they have to repay those postponed payments – known as forbearance – in a lump sum once three months are up.“
“The problem with the CARES Act is that it doesn’t make clear how borrowers pay back the money during a forbearance period,” says Shamus Roller, executive director at National Housing Law Project, a nonprofit legal advocacy center.
“There’s a chance that something could go wrong in that process,” he says, “and it requires a lot of interacting with servicers that are overburdened with calls.”
How to Start the Process
Per the CFPB:
HOW TO REQUEST FORBEARANCE OR OTHER MORTGAGE RELIEF
Call your servicer.
You may need to stay on the phone for a while before the servicer is able to take your call.
Loan servicers are experiencing a high call volume and are also impacted by the pandemic, so may be working with staffing and technology limitations.
Have your account number handy.
Depending on your situation, I may be able to help by eliminating your debts, lowering your payment, and giving you a cash cushion during these turbulent times. Don’t hesitate to reach out to me, as it would be my pleasure to assist you!
