Home lenders brace for up to 15 million mortgage defaults
This virus and the economic downturn won’t last forever and people remember people who helped them! Let’s all be a “part of the solution”.
I’m sure this new “forbearance” crisis is going to be a “circus” very similar to the previous loan mod experience that many of us experienced.
After all that’s why we called them “banksters”.
Note: In the past, if you have referred a client(s) to me whose loan has funded – I will assist them in the forbearance process – free of charge including – They’ll probably call you before me!
The following is straight from the CFPB
The Steps of Forbearance
1) Call the lender/servicer ASAP & let them know the situation immediately.
Note: The CFPB encouarges homeowners to “wait until they are actually in trouble” before they apply!
Wrong: Homeowners should be ahead of the curve – not behind it & apply ASAP; as soon as they are laid off or have any other “qualifying event!
And before the entire 15MIL distressed homeowners are in front of them!!!
2) Ask them what “forbearance” or “hardship” options may be available.
3) Servicers may require that the forbearance request or other assistance within a certain amount of time after a disaster or other qualifying event.
Mortgage Forbearance Options
Forbearance is complicated. There isn’t a “one size fits all” because the options depend on many factors.
NOTE: If the past is an indicator of the future; most of those reasons will be due the lenders under staffing – lack of infrastructure and a intransigence to just not to “grant relief” – no matter what the rules are.
Those factors include:
1) The type of loan
2) The owner or investor requirements in your mortgage loan
3) Who is the lender or servicer?
There are key things to consider with each type of forbearance.
You’ll want to pay close attention to how your servicer expects you to pay back any missed or reduced mortgage payments.
Here are Some Forbearance Examples to Guide You
Paused Payments Option – Paid During Existing Mortgage:
“No Help At All”
A servicer allows the borrower to stop making payments for 6 months, but you must pay everything back at once when your payments are due again.
This the least desirable option; Here’s why: After 6 months in missed payments- you have to make 7 to come current.
In this current economic environment, who is going to be able to do that?
What to consider:
1) You may owe a big bill that comes due all at once.
1a) For example, if a servicer allows non- payment for 6 months, at the end of the forbearance period, all 6 missed mortgage payments in 1 month.
2) Interest on the paused amounts continues to accrue until repay them.
Mortgage Payment Reduction Option:
“Not Much Help”
Servicer allows you to reduce a monthly mtg. payment by 50% for 3 months.
After 3 months, you have 1 year to pay back the entire reduction amount.
What to consider:
1) The amount of the reduction would be spread out over 12 months and added to your mortgage payment once the reduction period is over.
2) This means your monthly mortgage increases during that 1 year period.
3) Using the example above, you would defer half payment for three months and starting on the fourth month you would need to pay the deferred amount each month for the next 12 months.
4) Interest on any reduced amounts continue to accrues until repayment.
“Paused Payment Option”- Paid back at End of Mortgage:
The Best Option!
Your servicer allows you to pause payments for one year, & the amount is repaid by either adding it to the end of your mortgage loan or by you taking out a separate loan.
What to consider:
1) You can extend the term of your loan for some amount of time to pay back the paused payments OR take out a separate loan.
2) Extending your loan means the missed payments will be added on to the end of your loan.
3) For example: If you were given a twelve month period where you didn’t have to pay your mortgage, you’ll have twelve months of payments added on to the date when your loan was supposed to be paid off by.
4) Extending with a separate loan means when your mortgage is due you’ll also have to pay off this separate loan.
5) A balloon payment, which is 1 large payment at the end of the loan (30 years from now–looking pretty good-right?)
6) Interest on missed amounts continues to accrue until you repay them.
So the homeowner sells or refis when the market is up!!!!!!!!!
Does anyone really think in 5 – 7 years; SoCal homes will be worth less? No.
There’s a shortage of housing now and with a growing population there will continue to be a shortage!
CFPB Checklist
Use this checklist for more information on how to avoid foreclosure.
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