Right now if you own a home mortgage you may be considering forbearance and/or wondering if you can ask for mortgage forgiveness. As a local San Ramon mortgage broker, I am receiving many questions about home loan mortgage options, specifically forbearance.
What is Forbearance?
The recently passed CARES Act provides for a forbearance on certain mortgages for up to 180 days upon request to borrowers directly or indirectly affected by COVID-19.
A forbearance may be provided on federally backed mortgages, that are:
Securitized by
Fannie Mae, or
Freddie Mac
Insured by Government
FHA,
VA, or
USDA
Forbearance Mortgage Example
Homeowner Rich has a home mortgage and it is $3000/month.
Unfortunately Homeowner Rich is furloughed. Homeowner Rich calls his mortgage servicer and asks for forbearance.
He is granted 180 days, equal to six months, of “relief” from paying his $3000/month mortgage.
Seven months later (which is one month after his 180 days of “relief”), Homeowner Rich is back to work but hasn't been able to save money during the 180 forbearance period.
The forbearance is over and the mortgage servicer requests $21,000 which is now due!
Days (M
Homeowner Rich is shocked and requests a payment plan option. Mortgage servicer agrees to spread out the $18,000 over 12 months. Homeowner Rich’s new payment is now $4,500/month.
Homeowner Rich cannot afford $4,500/month and asks to refinance. Homeowner Rich is not eligible! Why? Because Homeowner Rich went into forbearance.
So what can Homeowner Rich do?
The options for Homeowner Rich would be to come up with the higher monthly payment of $4,500/month. That’s it. If Homeowner Rich cannot come up with the higher monthly payment, the mortgage servicer could exercise their right to FORECLOSE on the property!
What about Homeowner Rich’s home equity?
If Homeowner Rich has equity, he cannot use it because he had a recent forbearance. He also won't be able to get approved for a new loan. Homeowner Rich would need to sell his home to pay off the mortgage, in order, keep any remaining equity.
What if the home forecloses?
If the home forecloses, the mortgage servicer gets to keep the equity!
THIS IS FORBEARANCE!
Forbearance is NOT forgiveness.
Forbearance is not forgiveness and it can have a serious effect on your credit and ability to refinance. I know this is a difficult time for many. If you have any questions and would like a free mortgage loan review, I am here to help guide you in the proper direction.
We're in this together!
For over a decade, Jennifer Lampe has been building a reputation within the lending industry for her innovative thinking while still staying true to her unwavering integrity. As a licensed Finance Specialist, Jennifer has access to an extensive collection of resources allowing her to institute a cutting edge approach to today’s challenging market.