EP 34 - Forbearance&Scams - a podcast by Brian Cook And Kindra Cox

On Episode 34 of The Brian and Kindra show, they discussed forbearance and scams. While they’ve shared a little bit about forbearance in the past, there are a few new items to discuss in light of the recent CARES Act (Coronavirus Aid, Relief, and Economic Security).  Forbearance is an agreement with your mortgage servicer that allows you to temporarily pause or lower your payments for a period of time because of a hardship. 

Currently, because of the CARES Act, any US any government backed loan (USDA, VA, FHA, Fannie Mae, & Freddie Mac) may be eligible for a 180-day forbearance. They have even extended this so that if you call during the current 180 days and can prove continued hardship, they will extend forbearance for another 180 days.

Other loans not backed by the government are owned by private companies or investors. They may be running on borrowed money and need the income from your monthly payments to make their payments. With a private lender, you need to call your servicer to discuss your options. With any type of conventional loan, call your servicer if you need a forbearance. Loan servicer information is always on your payment slip. 

There are three types of forbearance repayment options: 1 - Paused Payment Option Paid During Existing Mortgage. (The amount of payments missed will be immediately due when the forbearance ends.); 2 - Mortgage Payment Reduction Option. (The monthly mortgage payment may be reduced to half for three months, but they will more than likely spread the unpaid amount over the next 12 months.); 3 - Paused Payment Option Paid at End of Mortgage (Payments are paused for 180 days and they will put the missed payments at the end of the note.). Consider that the paused payment option paid at the end will extend the term of your note or it will add a second note at the end for the missed payments or subsidized interest. The 6 months of missed payments may add more than 6 months in payments. It could be 9-12 additional months because of interest accrued.

The most important thing to remember with these three options is that the mortgagor still has the liability to pay their loan, interest and fees in full. Forbearance does not erase payments.  However, it is also important to remember that even while in forbearance you are still eligible to make payments on your loan helping to avoid accruing as much penalty.

Currently, due to the CARES Act, if you’re in a bind or hardship, there is a moratorium of starting any foreclosures for more than 120 days past due. If you miss four months of consecutive payments, they cannot start a foreclosure on you until 120 days after. However, if you aren’t in a forbearance, know that missed payments immediately start affecting your credit. If you are in forbearance, the missed payments won’t affect your credit. 

Last, be diligent to research all of your options and be wary of mortgage fraud. There are many scams circulating. Your mortgagee will not call requesting a partial payment over the phone. If you ever have any doubt with a phone call regarding your mortgage, hang-up and call the number on your payment slip. 

A few options if you are currently struggling to make your mortgage payments: 1 - call and get a forbearance; 2 - get a mortgage refinance to lower your payment, interest, and/or extend your note; 3 - sell your home and move to a home requiring lesser payment.

Brian and Kindra hope these tips have been helpful to you. As always, if you have any questions or need help, please feel free to reach out to your local real estate professional.

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