Homeowners en masse are asking for breaks on their mortgage payments, as millions of Americans face the prospect of unemployment or reduced income due to the coronavirus pandemic. But asking for forbearance on your mortgage is not foolproof.
Requests for abstention poured in. Forbearance requests rose 1,896% between March 16 and March 30, according to a recent report from the Mortgage Bankers Association, a trade group that represents the mortgage industry. And before that, forbearance requests had increased by about 1,270% between March 2 and March 16.
As consumers rushed to call their repairman for help, call centers were overwhelmed, resulting in longer wait times to speak to a representative.
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“If you’re eligible and need help, take full advantage of the program,” said Rick Sharga, a mortgage industry veteran and founder of CJ Patrick Company, a real estate consulting firm. “But in the same way, if you don’t need the help and can pay your mortgage, don’t try to play with the system and make it difficult for people who really need the benefits to get there.”
For those who haven’t yet entered into a forbearance agreement, here’s what you need to know:
“Tolerance is not forgiveness”
To be clear, mortgage borrowers will still have to repay their loan if they receive a forbearance.
“Tolerance is not forgiveness,” said Karan Kaul, associate researcher at the Urban Institute, a left-wing nonprofit political group. “You still owe the money you paid, it’s just that there is a temporary break from making your monthly payments.”
““Tolerance is not forgiveness. You still owe the money you paid, it’s just that there is a temporary break to make your monthly payments.“
Under a forbearance agreement, a borrower can suspend payments altogether or make reduced payments on their mortgage. Homeowners with federally guaranteed mortgages are eligible for a forbearance period of up to 180 days initially under the CARES Act. At this point, if they are still facing financial hardship, they can request an extension of up to an additional 180 days of abstention.
Stimulus package provisions state that during the forbearance period, mortgage services cannot make negative reports on the borrower in question to the credit bureaus, including the main three, Experian EXPGY,
, Equifax EFX,
and TransUnion TRU,
. Borrowers will also not be charged late fees or penalties if they are granted forbearance.
You need to know who your repairman is
Homeowners in difficulty will not automatically receive abstention. You must request it from your repairer.
Mortgage agents are the companies that receive your monthly payments. A homeowner’s mortgage manager is not necessarily the same as their lender – many lenders sell mortgage servicing rights to other companies.
The first step in determining who your manager is would be to check your mortgage statement. If for some reason the information is not there, you can search for it by searching for the Electronic Mortgage Registration Systems Website. Alternatively, you can check with Fannie Mae and Freddie Mac if your loan is backed by one of them.
How do you know if you are eligible?
To be eligible for forbearance, a borrower must have a mortgage guaranteed by one of the following federal agencies:
• Fannie Mae
• Freddie Mac
• The Federal Housing Administration (FHA)
• The US Department of Veterans Affairs (VA)
• The United States Department of Agriculture (USDA)
Borrowers should avoid calling their agents to find out if they are eligible, Sharga said.
“Find out what you can before you try to contact your mortgage agent because he is currently overwhelmed with call volume,” said Sharga.
Fannie Mae FNMA,
and Freddie Mac FMCC,
both have websites where you can check if your loan is backed by any of them. You can access these websites here and here. Almost half of all mortgage loans in the United States are guaranteed by Fannie and Freddie.
To find out if your loan is FHA guaranteed, check the original closing documents or your most recent mortgage statement. If you are paying for FHA insurance, this agency guarantees your loan. Alternatively, your closing documents should include a Department of Housing and Urban Development (HUD) statement and a 13-digit HUD number.
Since the VA and USDA loan programs target specific borrowers, these borrowers should already know if they have loans guaranteed by these agencies. If you are still not sure, you can call your repairman.
Those who don’t qualify aren’t necessarily unlucky, however. Federal government unsecured mortgage agents may still be willing to show tolerance to borrowers facing financial problems at this time.
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Be prepared to answer some questions
You don’t need to provide any documents to prove your financial hardship at this time, but your agent may have questions to determine what assistance they will offer you.
The Consumer Financial Protection Bureau suggest to be prepared to answer the following:
• Why can’t you make your payments?
• Is the problem you are facing temporary or permanent?
• What is the current state of your income, expenses and other assets, including money in the bank?
• Are you a military person with a permanent change of station orders?
“Consumers should report that they have had difficulty due to COVID-19 and inquire about their forbearance options with the company handling the mortgage,” said Chris Diamond, director of financial products at the lender. Better.com online mortgage. “They should ask how long they are eligible for and what their options are at the end of that forbearance period.”
Obtain your written abstention agreement
The CFPB stresses that any borrower who has benefited from a suspension of mortgage payments must obtain his agreement in writing.
“Once you are able to get a forbearance or other mortgage relief option, ask your agent to provide written documents that confirm the details of your agreement and that you understand the terms,” he said. agency on its website.
Having the agreement in writing will protect you if there are any errors in your mortgage statement or credit report.
Watch out for lump sum payments
Once a borrower has obtained a forbearance agreement from their service agent, they should discuss repayment options.
“You don’t want a surprise like finding out that six months of deferred loan payments are all due immediately at the end of the forbearance,” Sharga said. “Most people just won’t have six months of mortgage payments available.
Some borrowers have expressed concerns after being offered a lump sum payment option like the one described by Sharga. With a lump sum payment, a borrower would repay the entire amount owed for the forbearance period in one go.
Although a lender may offer an optional lump sum payment, there is nothing forcing a borrower to repay in this manner, Kaul said.
Read more:U.S. housing market shows first signs of trouble from coronavirus pandemic
Homeowners can and should aim to negotiate the best possible repayment options for them. “All of these terms are negotiable,” Sharga said. “Be diligent, be steadfast, and try to hold on.”
Beyond a lump sum payment, agents may offer to extend the term of the mortgage and make up for missed payments at the end, so that a 30-year mortgage would be extended by 4 months if it is. amount of forbearance a borrower has received.
“There is no mandate that a borrower should repay what they owe in missed payments in one lump sum payment after forbearance.“
Alternatively, a borrower may also be offered the option of amortizing the balance they owe over the term of the loan. This means that they would repay part of the balance owed in addition to their usual monthly payments.
A borrower may request information about the owner of their mortgage note, as the owner may be able to offer more relief options. Repairers must respond to these requests within 10 business days, said Andrea Bopp Stark, a lawyer at the National Consumer Law Center.
“If the server agent does not respond, the borrower should send another letter and seek legal assistance,” said Bopp Stark. “The duty officer could be held liable for actual damages and up to $ 2,000 in statutory damages for failure to respond.”
If you are still in financial difficulty after the forbearance, consider a loan modification
It’s too early to say whether 12 months of abstention will be enough for those who are among the millions of Americans who have lost their jobs in recent weeks.
“The most beneficial option if the borrower can be out of work or affected for an extended period of time is to apply for the loan modification at the end of the forbearance,” Diamond said.
Unlike forbearance, a loan modification involves a permanent change in the details of the mortgage. This can include adjusting the interest rate, extending the term of the loan, or deferring the amount owed until the end of the loan as a separate lien.
A service agent will determine whether or not a borrower qualifies for the modification.