Forbearance the right way

We get it, these are challenging time, and with reduction in hours, and job loss, making your house payment can be a challenge.

As part of the CARE ACT, the government has forced lenders to offer forbearance to anyone who asks WITHOUT requiring proof of hardship. A better understanding of forbearance would be to say “short term pause.”

Both lenders and the National Association of Realtors are working diligently to educate people on proper uses of forbearance. (See NAR’s recent FAQ)

Forbearance should only be used by homeowners who are genuinely in distress and cannot afford to make payments. The program is NOT intended as a stimulus, Missed payments are not forgiven, but simply delayed and will need to be made up.

Widespread forbearance is causing lenders to raise requirements on new home buyers, and interest rates. High use of forbearance unnecessarily, this will cause lenders to pull back further, making it even more difficult to buy and sell homes.

Case Example:

I just took an application from a client for a new home purchase yesterday (4/21/2020). They didn’t say anything at first, but their credit report showed the current mortgage loan in forbearance. When I inquired about it, I was told the one was on furlough until the Government reopens the state. She heard about the forbearance option, called her lender, and got the forbearance (pause) in 5 minutes over the phone with no questions asked.

When I asked if they were in financial distress, they said no (remember, they are wanting to buy a new home).

They further indicated the one out of work temporarily was receiving both unemployment AND the $600 a week federal money, and therefore actually bringing home MORE than the lost income!

I asked why the forbearance request. The answer? Simply because it was an option.

I asked if they understood repayment options. They indicated they never asked, and were never told.


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