The Truth about Forbearance

There has been a lot of talk about forbearance in the mortgage world lately. For those who are experiencing difficulty making their mortgage payments a forbearance could be a good solution but it may not be the best solution for each situation. It’s best to understand what a forbearance is, as well as what it isn’t before making a decision.

But first, let’s start out by saying , “skipping payments” is not a thing. For anyone who is experiencing difficulty making mortgage payments on time due to the national coronavirus emergency, there is likely help available but it is not as easy as just skipping payments. What has been on the minds of many, is the recently announced CARES Act. It contains provisions that allow borrowers with government-backed loans to temporarily suspend payments. Of course this is only for those who are experiencing financial difficulties due to the impact of the coronavirus pandemic.

There are some things to remember:

A forbearance is not a free pass. A forbearance allows mortgage loan borrowers to suspend their loan payments for a limited time. Forbearance does not erase the payments borrowers would normally make during the forbearance period. And borrowers will have to pay any and all missed payments in the future.

The CARES Act intends to prevent negative impacts to your credit if you undertake a forbearance for your government backed loan. However, changes to reporting between servicers and credit agencies may not occur seamlessly. If you do pursue a forbearance, you will need to monitor your credit report to catch and report any errors.

Take the time to think it through. A forbearance is not a forgiveness. It does not eliminate payments; it only delays them. Therefore, borrowers who can make their mortgage payments should do so.

If you are considering a forbearance, you will need to reach out to your loan servicer; this information can be found at the top of your mortgage statement. Also, it is important to understand the repayment requirements after the forbearance period- click here for a list of questions to ask your loan servicer.

Lastly, (but importantly) be on the lookout for scammers wanting to take advantage of those impacted by the coronavirus. Scammers are making fraudulent calls and sending fraudulent emails and text messages stating they can help reduce or stop your mortgage payments. Remember, you will need to work directly with your mortgage servicer; the servicer is the only one who can approve a forbearance.