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11/10/2020

Forbearance News and Planning


Corona virus has been lurking in America for almost ten months now, Pfizer announced they have a vaccine that is ninety percent effective with is quite wonderful good news, but we still have not gone through final FDA approval, figured out how to safely deliver the thing in sub eighty below zero and manufacture enough for everyone in the United States. My guess is some vaccine will be in your CVS and Right Aid by July 2020. Meanwhile millions of employees in this country remain out of work. Millions of students who graduated college in June have not found gainful employment. Hundreds of thousands of people who owned a restaurant, a motel, a personal service or businesses considered human touching and not essential are file bankruptcy.

As the coronavirus continues to march on our lives many states issued shut-down orders for businesses. Forty million people filed for unemployment in May 2020  On March 27, Congress passed the CARES Act to offer economic relief. Unemployment benefits were increased to cover these devastating losses. Mortgage forbearance was offered to homeowners with mortgages backed or insured by the federal government, including Freddie MacFannie MaeVA and FHA. Courts were closed to evictions and foreclosures. Now that courts have mostly re-opened and the CARES Act funds shriveled up in Congress and the Senate stalemates, homeowners are not back to their normal income but no longer have the safety net of unemployment $2600 monthly income and forbearances may soon end.

FHFA has instituted a half a point pricing addition to all refinances in America after December first to try and cover the losses they expect Fannie Mae and Freddie Mac to suffer holding loans that made minimal or no payment for a year.

The CARES Act offered homeowners the opportunity to ask for forbearance from their mortgage servicer and suspend payments for up to twelve months. Approximately five million homeowners asked for forbearance since the program began. In September 2020, the number of households whose mortgage was in an active forbearance decreased.  

To request mortgage relief under the CARES Act there are two options:

1.    You call your loan servicer directly. Your servicer is the company that you send your mortgage payments to each month and the number should is on your payment coupon or search for them online, you know google it or ask siri.

2.    You write and mail a hardship letter affirming that you are enduring financial distress caused by COVID-19. This creates a written record that you are pursuing forbearance protection. Letters may be emailed, faxed, or physically mailed to your mortgage servicer.

Yes, if you have experienced job loss, reduced income, illness or other issues related to COVID-19 you could be eligible for forbearance. You will need to mention the actual hardship.

Yes, under the CARES Act, if you have a federally backed mortgage, you can request an extension of the forbearance for up to an additional 180 days after the twelve-month period. Your servicer contacts the owner/trustee of the note and comes up with a plan. Your monthly income is compared to the monthly mortgage payment to find a temporary solution until you get back to work or your health improves or the situation returns to “normal.”

If your servicer approves your request, you will be provided a forbearance agreement outlining the terms. During the forbearance period, the servicer cannot begin or continue with foreclosure proceedings. Default is put on hold during the twelve-month period. Every lender has different unique interpretations of the CARES Act. Your neighbor’s forbearance may not be at all like what you are offered.

Around month ten your servicer contacts you prior to the end of your forbearance plan to discuss options for bringing the mortgage current. However, you can contact them sooner to start this discussion and plan for the best option for you, based on your individual circumstances.

If you have returned to “normal” -say are back to the same job and have the financial capacity, the best option is to do a reinstatement or repayment plan. Reinstatement is the act of restoring a delinquent mortgage to current status. A reinstatement is when the borrower pays the regular monthly payments plus an additional agreed upon amount in repayment of the delinquency for a period of time. For example: make the old payment plus twenty percent until you get caught up. However, there might be additional options, including deferring missed payments until the end of the loan (payment deferral), payment relief options if needed (loan modification) or other alternatives such as short sale.

Home retention options may include payment deferral or a loan modification. If you recall in the crash of 2007-2008 it was not easy to get a modification. Proof of income to demonstrate you can make the payment and have “healed” the problems. If you have no income, or too low of an income to make some payment ongoing and you have equity, it may be most prudent to consider selling while markets in most of the United States have appreciated and held value.

While in forbearance you will not be able to close on another government loan. If you want to refinance most lenders will require you to bring the loan current and or certify you don’t plan to go into forbearance on the new lower rate mortgage.

Forbearances peaked the week ending April 4th 2020. Those that stay the course on forbearances for twelve months, come off in April 2021, pending any additional government intervention. We do not know what corona virus has in store coming this winter. We might face further shut down.  No one knows what the future brings. Find ways to increase income, sell the boat and luxury items, don’t get divorced it adds double the expenses, and be kind to your neighbors who may be quietly suffering the burden of financial worry.

 

I will keep you all close to my heart.

Caroline Gerardo Barbeau

https://carolineg.swmcretail.com/

(949) 784-9699

C G  NMLS 324982

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