Facts about Mortgage Relief Forbearance during COVID-19 Pandemic

There is a lot of talk going around these days about mortgage relief and people are hearing that they can ask their mortgage company to let them skip some payments. This process is called forbearance and that is what mortgage servicing companies are prepared to offer right now and this is not a simple or straight forward process. You need to approach forbearance cautiously and ask questions. It could be very helpful to start with the definition of the word.

for·bear·ance

Similar: leniency, long-sufferingness, self-control o LAW the action of refraining from exercising a legal right, especially enforcing the payment of a debt.

Forbearance dos NOT = forgiveness.

So you see, it leaves a lot of room for interpretation and that is my point. Not every mortgage servicing company is handling it the same. One company may tell you that you can skip 3 payments and we will simply tack them on the back of the mortgage which would be real and actual mortgage payment relief. Yet another company may tell you that you can skip 3 months of payments and then after 90 days you will owe 4 payments plus a hefty service fee. The latter scenario actually happened to a very dear client of mine (my mother).

Let’s do some mortgage forbearance math:

- Jim has a mortgage of $2,500 a month.

- Jim get’s laid off, he calls the mortgage servicer and asks for forbearance. In one phone call he gets 6 months off from paying.

- Six months later, Jim is finally back to work but he has not been able to save much money. Forbearance is lifted and he now owes $15,000 + $2,500 for a total of $17,500

- After picking himself off the floor Jim says…WHY?!?

Servicer: “That is the 6 months forbearance plus the current months payment.”

Jim: “I can’t do that, can we work something out?”

Servicer: “Sure, we can spread the $15,000 out over 12 months.”

Jim: “OK what will that look like?”

Servicer: “That will be $3,750 a month for the next 12 months.”

Jim: “OMG! I can’t afford that, can I refinance?”

Servicer: “No because the loan was in forbearance.”

The bottom line is that you will need to assess your individual need and then discuss with the company who is currently servicing your mortgage. They may have different options based on individual need. I sincerely hope that you are able to get the relief that you need if you need it.

I created a video and it is at: https://youtu.be/l0MBVKDYARk

Furthermore, my friend Barry Habib wrote an article defining the current crisis and the Fed and how it is affecting the mortgage industry directly. Barry is an industry expert and has been for decades I subscribe to his services and follow his advice and it helps me to be a better mortgage advisor. He has made the information available to everyone whether you subscribe or not and is at: https://mbshighway.com/mortgage-crisis.html

FAQ on Forbearance: https://www.consumerfinance.gov/ask-cfpb/what-is-forbearance-en-289/

Thank you and please be good to each other out there.

Need to know more? Please send me your real estate and mortgage-related questions. I am happy to answer you and it may become the topic of a future article.

Hans Bruhner (NMLS 243484) is a Mortgage Advisor for Finance of America Mortgage (NMLS 1071). Both are licensed by the Department of Business Oversight under the CRMLA. If you have a question, please contact Hans at (707) 887-1275 or hans@hansblog.com