What to Know About COVID Related Forbearance
The COVID-19 pandemic has turned the world snd the real estate industry on its head. Many Americans have been laid off, furloughed, or otherwise aren’t making the same income they did before the pandemic started. Unfortunately, this means many homeowners are struggling with their mortgage payments and it’s difficult to see a way out.
What is Forbearance?
Forbearance means “holding back” and that’s what both you and your lender are doing in forbearance. Forbearance is an agreement between borrower and lender to put mortgage payments on hold or for the borrower to pay lower rates for a period. Forbearance is not forgiveness and delayed or lower payments will need to be paid back.
Is Mortgage Forbearance a Good Idea?
It’s tough to say that mortgage forbearance is a good idea but it’s undoubtedly a better idea than missing your payments and heading toward foreclosure. The idea behind forbearance is to keep things from getting worse. While it’s difficult to say forbearance is a good idea for any homeowner to do, it can help save you from much bigger problems.
How Can I Get a Forbearance on my Mortgage?
Your first step is to call your lender and look over your options. While lenders and bankers have a reputation as number-driven bureaucrats, they’re real people and understand that thousands of homeowners have been put in danger of losing their homes due to the coronavirus pandemic.
The CARES Act and Forbearance
On March 25th, 2020 the U.S. Senate passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act as a lifeline to those struggling with payments and other economic issues during COVID-19. The CARES Act offers two protections for homeowners during the coronavirus pandemic including:
How Many Forbearances Are You Allowed?
Every lender handles forbearance differently, but borrowers cannot generally file for forbearance and then file for another forbearance immediately after the first one runs out. In the case of COVID-19, you can automatically file an extension for forbearance for an additional 180 days, but forbearance is generally an emergency stop-gap measure used once for your mortgage. The number of forbearances that your lenders allow is how many you’re allowed.
Does Forbearance Affect Credit?
Many homeowners are afraid that forbearance will reduce their credit score to rubble but that’s not true during the coronavirus pandemic. Though your lender will list your mortgage as in forbearance, it will not currently negatively affect your credit score per CARES Act guidelines. You should still talk with your lender to be certain they’re following all guidelines.
What is a Short Sale?
COIVD-related forbearance is the answer for most homeowners, but short sales can also be useful during financial crises. A short sale is an agreement between the homeowner and the lender to sell the home for less than the amount remaining on the mortgage. Short sales are homes that are normally on their way to default or foreclosure. A short sale lets both the homeowner and the lender escape from the mortgage without losing excessive resources or money to foreclosure.
What About Deferment?
If you’re experiencing COVID-related hardship but only need minor help you could talk to your lender about loan deferment options. In deferment your lender agrees to postpone (defer) your payments, typically for 6 or 12 months. Call your lender about deferment options if you’re facing financial hardships due to coronavirus.
Getting COVID Related Forbearance Questions Answered
Forbearance, short sales, and other related matters are complicated enough but the coronavirus pandemic has made things worse. If you feel like you’re underwater or need help quickly before you go into default on your mortgage, its best to reach out to a real estate team that specializes in these unique transactions.
We’ll Get Through This
The coronavirus pandemic has shuttered businesses and shattered lives but with the help of the CARES Act, a phone call to your lender, and the help of a qualified real estate team you can get through the worst of it. Don’t wait another day while your mortgage heads toward default, pick up the phone to tell your lender you need help today.