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Forbearance, What, Why, Who, and When?

Nobody can argue that this is a crazy time we are living in. Everyone is experiencing some sort of new reality, whether it’s from being laid off, fired, or furloughed to working from home or working on the front lines with a face mask and gloves as an essential employee. Many of us are still stunned and trying to figure it all out, as it seems this change happened overnight. We are trying to find new and innovative ways to do business and connect socially. 

Among the many new challenges we are facing involves something near and dear to my heart; homeownership. Approximately 63% of all homeowners carry a mortgage, and many of them are now seeing a significant reduction or complete lack of income. That’s a whole lot of stressed-out people, but there is help. Forbearance; this will probably be the most utilized option available to borrowers, but is it the right choice for you?

What is forbearance? I’m sure you have heard the word being thrown around lately. It is an agreement to temporarily postpone payments for a loan and it has actually been around for quite a while. Usually only used on a case-by-case basis for homeowners experiencing an individual financial hardship, or sometimes in mass, geographically when a disaster strikes. This time though, the disaster is everywhere, all at once, and everyone is hurting. Even though any lender or service provider can grant a forbearance; through the CARES ACT, the government has made provisions allowing borrowers affected by the coronavirus, a forbearance of up to 180 days, with the possibility of an additional 180 days following, on any FHA, VA, USDA, Fannie Mae or Freddie Mac loan.

Why should you ask your loan service provider for a forbearance? There is only one answer, you can’t make the full monthly payment. It’s important to keep in mind that forbearance does not equal free. You will have to make up those payments which could put further strain on your ability to pay down the road, up to and including having to pay it back in one lump sum at the end of the forbearance period. I don’t know about you, but I definitely would not want that hanging over my head. That is why it is important to ask your mortgage servicer how you will be required to pay back the amount owed after the forbearance period has ended.

Who should not utilize a forbearance? Anyone that can continue making timely minimum payments. For the reasons mentioned above, don’t take a forbearance if you don’t need it, you will only be kicking the can down the road, and although they cannot report the payments as missed or late, they do continue to accrue interest.

When should you call your lender if you need to? Now! The sooner, the better. You may have to wait on hold for a while, but if you sincerely need forbearance to save your home, don’t wait for them to call you. In fact, if anyone does call you in relation to saving your home, hang the phone up and immediately call your loan service provider directly.

For more information visit: Best wishes everyone! Be patient, remain vigilant, and stay safe.

Work With Robert

Robert is your go-to Real Estate Broker Associate at SERHANT., where we redefine Global Luxury. From expansive golf course estates to exclusive waterfront havens and everything in between, Robert merges cutting-edge marketing strategies with a classic, high-touch service approach, ensuring every transaction is handled with unparalleled discretion and integrity.

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