05/14/2020
This is a must read if you or someone you know are thinking about mortgage forbearance. If you have questions, feel free to reach out to Collette Horton, your mortgage person or call me. Below is a shared post from a friend of mine in the mortgage industry.
Hey gang. I am getting lots of calls regarding the forbearance issue. I wantedto put a post out that you can share with your friends and family. Remember, I am never too busy for your questions or your referrals! Don't jump into something you are not sure about. I am just a phone call, text or instant message away.
FORBEARANCE - Be very careful and know what it could mean for you
If you currently own a home and have a mortgage you have probably seen, heard, or read something about this thing called Forbearance. It is part of the CARES Act and on the surface may seem like a helping hand for those in need. Well, it is a helping hand for those that truly need it, the challenge is lots of people are requesting it, either on purpose or by accident that doesn't actually need it and this has a significant potential consequence. Under the CARES act, if a borrower request forbearance the lender must give it to the borrower, no questions asked. What borrowers may not fully understand is that although the CARES act protects your credit that the payments will not be reported as late payments, it will report that your loan was or is in forbearance. What this means is if you want to refinance or perhaps you are looking to sell your current home and purchase a new one, or maybe buy a second home or investment property, you may be shocked when your lender tells you they cannot lend you money due to the fact that you took forbearance. There are a lot of battles going on with the government FHFA and the like to try to solve these unintended consequences, but you really need to understand what you are getting yourself into. What Forbearance means for lenders - First when a borrower makes a claim for forbearance it is assumed that they have an actual financial need and are unable to make their payments. Second, when a loan goes into forbearance the lender is not able to sell that loan in the secondary market and recoup its capital to lend again which is creating capacity issues in the mortgage market. So if you are a lender and someone makes an application and they have forbearance on a current or prior mortgage this is both a sign of financial issues as well as added risk to the lender because if they lend and the borrower claims forbearance on the new loan, they are stuck with it. If it is an FHA insured loan the lender actually has to continue to make the payments on behalf of the borrower to the bondholder even though no payments are coming in. Yes at some point they will get their money back once the loan comes out of forbearance, but in the interim, this can add up to hundreds of thousands of dollars very quickly. So the caution here is unless you actually need forbearance you may not want to claim it as it could have an impact on your future borrowing. Obviously, if you do need it that is what it is there for. One other note of caution is there have been numerous people that have ended up in forbearance without actually knowing they requested it by simply clicking a button on their mortgage servicers website or from an email they received from their servicer. They thought they were just requesting information when in reality they put themselves into forbearance. Below is a link to a video that helps explain what forbearance is doing to the mortgage lending industry. https://www.theresource.tv/archives/the-forbearance-challenged-explained/
Collette Horton
281-830-8888
NMLS ID 290357
Liberty Star Mortgage
a division of Network FundingNMLS 2297
The Forbearance Challenged Explained - TheREsource.tv
***A great video to share with your clients and all referral partners***
THERESOURCE.TV
***A great video to share with your clients and all referral partners***
