Mortgage Forbearance Programs Being Offered Can Still Bite You

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With the current Coronavirus pandemic having such a devastating effect on people being able to continue working, millions losing their jobs and some businesses probably never coming out of the crisis intact and having to close their businesses forever, paying bills has become an issue for many. And it will continue.

Relief for Homeowners and Tenants

Relief has come to those missing their rent and mortgage payments in California by way of halting eviction and foreclosure proceedings until Governor Gavin Newsom declares that California is no longer in a “state of emergency.”

And once the emergency is lifted by Governor Newsom, tenants that are facing eviction will get at least another 60 days before before eviction action, provided that they respond to a court summons.

Foreclosures are also banned during the emergency, and gives California property owners at least 90 days after the order is lifted before a court can take action, provided that owners respond to a mortgage lender’s court filing.

It is just as important to note that those who had already missed their rent or mortgage payments prior to the pandemic will have the clock start ticking once again once the moratorium is lifted. Meaning, if you missed 3 months of mortgage payments, once it is lifted, the effect of those 3 months (or whatever payments you missed) will continue forward.

In addition, many local ordinances have been developed and it is important that you research what additions or changes may exist in your county.

Always talk to your landlord lender if you think you will be missing rent or mortgage payments to see what plans they may offer.

Can’t Make the Mortgage Payment?

With probably the highest bill that you have being your mortgage, mortgage payments are starting to become delinquent for millions of people in the country, and most likely the world. Because of this, many lenders are coming up with or some are being forced with providing what is called a “forbearance” plan which means that they can suspend your payments for a certain amount of time anywhere from 90 days for some lenders and up to 180 days or more from others.

Mortgage debt relief programs for homeowners – by Credit Karma

However, some are calling for the payments that you will be behind to be due within a certain amount of time anywhere from 3 months or more while others are simply adding the mortgage payments that will be missed to the end of the loan which I personally think would be the right thing to do and wish that all lenders did this. One can dream.

In addition, even though lenders are not supposed to report your late payments if you are in a forbearance, once you plan to do a refi or purchase of another home in the next year or two, lenders will most likely request a credit rating from your current lender and your forbearance or missed payment will more than likely be in that mortgage rating which will cause you issues for a while. Typically mortgage lates hurt you a lot less after two years, but some lenders are now saying that they will not lend to any borrowers who had a forbearance program for seven years from the forbearance. So if you have been wanting to take advantage of the lower interest rates by refinancing sometime in the near future or were planning on selling and buying another home, this could put a monkey wrench into those plans, or close the doors to some lenders.

The biggest hit you will take on your credit report is the missing of mortgage payments, over pretty much everything else.

“It’s an unknown, do it (miss payments and forbearance plan) as the last resort,” said Brian Dean of Opes Advisors. “Things could change in the future, but right now it’s the big unknown.”

So what do you do?

First and foremost, speak with your lender immediately if you think that you are in danger of missing mortgage payments. Let them know and see what programs they offer. Not every lender will offer the same program and not every lender will be on the same page with everyone else. The danger is when you miss payments and don’t contact your lender and they tend to assume the worst. Speaking with your lender about your situation will not only relieve some of your stress, but also theirs and they will more than likely move their attention to borrowers that are missing payments and not calling them back.

Secondly, save your home and if you have to get a forbearance program in order to do so, do it. Those moving plans or refinance plans sometimes will have to take a back seat because if you miss payments without a forbearance plan and end up losing your home in the long run, those plans would be null and void regardless.

The key is as stated, speak with your mortgage servicer and don’t rely on everything you read online or information being given to you by others because not all lenders are doing the same thing. And know your consequences by speaking to your lender directly and asking those questions of how they will report the missed payments or forbearance plans, in addition to how much time you will have to make up back payments.

And more than anything, stay safe out there!

Robert Aldana
REALTOR® since 1986

DRE # 00921165
Keller Williams Realty
831-252-3959 Direct Line

[email protected]
www.robertaldana.com

ABOUT ROB: Robert Aldana is a 34+ year licensed real estate veteran with Keller Williams Realty, and also a long-term resident and homeowner in Scotts Valley.

In 2015, 2016, 2017, 2018 and 2019 Robert was the agent chosen by more Scotts Valley area home sellers and buyers than any agent or team, and Robert was awarded the Santa Cruz Sentinel Readers Choice Award as the Best REALTOR® in Scotts Valley for four straight years 2016, 2017, 2018 and again in 2019. Robert is also the ALL-TIME leading real estate agent in Scotts Valley sales.

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