Even though the mortgage delinquency rate is going up since the beginning of COVID-19 the rise has not expectedly risen to meet the number of unemployment claims. This has credit and housing counseling services concerned that homeowners may be staying silent about their current financial situations and the ability to pay their mortgages in the coming months.
Financial counselors all across the nation are advising homeowners not to sit back and wait or rely on relief programs or forgiveness statutes. They want homeowners to know this is not the time to sit back and wait. This is the time to act quickly at the first signs of not being able to pay your mortgage. One of the options available to anyone having a hard time making mortgage payments is to seek out a forbearance and this process can take anywhere from 30 to 60 days right now. It may take longer as more people begin to apply.
What is Forbearance?
Forbearance gives the borrower permission to put a freeze on making mortgage payments for an agreed-upon period of time due to financial hardship. These payments will not be erased or forgiven, merely delayed for a period of time. The borrower must pay all missed payments when the forbearance period is over either in one lump sum or in a payment plan. Be sure that you clearly know the terms of your forbearance plan. It is not uncommon for borrowers to be focused on financial help and not fully concentrate on the fine details.
How Can You Qualify?
Under the Cares Act, anyone with a federally backed mortgage should have a forbearance plan available to them from their loan servicer. Homeowners with federally backed mortgages are eligible for up to 180 days (6 months) of forbearance. These are borrowers with FHA, VA, USDA loans and loans backed by Fannie Mae or Freddie Mac.
If you do not have a federally backed mortgage there is still a chance to qualify for forbearance. A large number of lenders are offering forbearance programs for their customers right now.
You Should Contact Your Mortgage Servicer But Before You Do, Get Advice
The mortgage servicer is the company that you make the mortgage payments to. This is oftentimes different from your actual lender you made deals with when closing your mortgage. Many times borrowers will call the servicer directly and talk with an employee of the company whose main focus and paycheck are dependent on collecting the highest dollar amount possible on your mortgage, They are not going to make an offer that is in your best interest in most cases.
Before you present your case to your servicer talk with a housing counselor and let them look at your situation. They will be able to help advise you on what to say and how to navigate this conversation with your loan servicer. Most of the time a lender has a set forbearance program that is not typically offered first off. Lenders need to know what is available to them and what the specific terms are and what they would be agreeing to. A housing counselor can help.
What Information Should You Have Ready?
Proof of all income and all expenses is key to proving proof you really do need forbearance. Things like pay stubs, bank statements, and bills. This will help you to compile and present a strong case for what you can truly afford to pay.
Will Forbearance Affect Your Credit Rating?
The Cares Act states that in a forbearance period, federally backed mortgages can’t send negative reports to credit bureaus. If you do not have a federally backed mortgage it depends upon the type of forbearance you have and you want to make sure you get in writing that your servicer will not send negative information.
Be Cautious of Scams
There are companies out there that will contact you promising to get you a lower payment if you send a certain amount of money upfront. Don’t do it, these are scams.
Are you curious about COVID mortgage options available to you in California? Please give me a call. I am here to help.