Here at the Broward Real Estate Investor's Association, we've kept our fingers firmly on the pulse of the market during the COVID-19 pandemic. Today we'll talk about why you need to be careful when you opt not to pay a mortgage payment during the pandemic, and what your mortgage servicing company may be hiding from you. It's important you get all of the facts, so in today's update, we'll share with you some data on what we're seeing happening on the front lines.
The Truth About the COVID-19 Mortgage Situation
Many people have most definitely reached out to their mortgage servicer asking for some help or leniency on their payments. With the global pandemic going on, times have gotten hard on many business owners and the ability to make payments has been something that has become more difficult as the world is mostly shut down and staying at home.
Many people are being told by their loan servicing company that they can halt their mortgage payments for up to 90 days, and when that time frame is up, they can pay the entire amount due in one lump sum. We talked about that earlier in this article we wrote on March 23.
However, what the borrowers are being told in a lot of situations may not be the entire story, so it's important you read the rest of this article as you may have options you didn't know about.
If you are confused, don't worry – most people are! The same bureaucracy that started allowing borrowers get up to a year of forbearance and tack on the payments to the back end of the loans are the same ones who are giving information that's confusing, incomplete, and hard to understand.
Your Mortgage Options in 2020
This is the best list of options you have at your disposal. In any case, remaining in close contact with your mortgage servicer is the best thing you can do. Assume nothing, and take action.
- Extend the Forbearance Period
You have the luxury of missing payments for a total of three months at a time, until a full year. As the borrower, you'll have to make four requests separately and it will also push back your ability to make a play to repay the owed funds from one of these next four options.
- One Lump Sum
This option would have have the borrower repay all of the missed payments in one fell swoop, and this scenario is for people who were unable to pay their mortgage due to a loss of income.
- Spread the Payments Over Time
This option gives you normally six months to a full year of adding some money on top of your regular mortgage payment. Of course, the added funds on top of a regular payment will be difficult for people in any circumstance, and definitely more difficult for people coming fresh out of a forbearance period.
- Extend The Loan Based on The Number of Missed Payments
This is what most people are hearing, and it's probably the best option for most people going through hardship. In this scenario, the missed months are added to the back end of the loan. You may hear the terms deferral, or even extension, and banks are expecting most people to seek out this option as they regain the ability to earn the same amount of money they made prior to the global pandemic.
- Loan Modification
You will have the option to modify your entire loan, including your interest rate and duration of the loan, in an effort to make it affordable for you.
The loan guarantors such as Fannie Mae and Freddie Mac have had a major influence in this confusion because they have told the mortgage servicers to NOT offer all of the above options when a customer first calls them to ask about getting a forbearance. Essentially, they have a process they are following and trying to only present those options as the contact happens and as things move forward.
In fact, a script even exists on their website!
There is so much confusion out there, that it's spilling over to social media. Mortgage servicers of all sizes are getting requests from people on how the scenario can be played out, and they are largely telling people that they can skip three months and repay the lump sum when the three month period is over.
This is simply not true – you have options!
One thing to keep in mind, especially if you feel like you are getting nowhere with your conversation with your mortgage servicer, is that they typically will only go over your options to repay when you near the end of the forbearance period. This also comes up after they ask you to pay for the total due of the missed payments.
When you tell them that isn't possible, they will ask you to spread the money out over the upcoming payments.
When you tell them that isn't possible, they will offer to put the missed payments on the back of your loan, or possibly offer a loan modification.
How We Got To This Point
These options presented above were instituted by the Federal Housing Finance Agency in an effort to assist victims of natural disasters keep possession of their property without a massive amount of paperwork being needed to accomplish this effort, according to Sara Sanghas, who is a lending administrator with the Mortgage Bankers Association.
Perhaps the best part of the options offered are that the borrower doesn't have to come out of pocket, and it'll also keep the participants in good standing with credit bureau's assuming they fulfill the repayment terms.
Again, our best advice is to contact your loan servicer and start a discussion. Don't simply stop making payments! Let them know of the hardship you are going through due to the coronavirus pandemic. If you don't contact them, your loan will go into delinquency.
Keep Yourself Informed
The best advice we can give you is to check your bank's website. Many of the large banks have been uploading informational sheets to their websites that help borrowers know what options will exist after the forbearance period. You'll find these already online at CitiBank, Wells Fargo, and Truist here in South Florida.