There’s been a buzz about a mass mortgage forgiveness program that I wanted to nip in the bud before we start spinning out of control. I lived and worked in this business through the 2008 housing crisis and, believe me, I’d rather not go through that again. We need to be PROactive, not reactive. We need to think smart. We need to communicate. Since we have some extra time on our hands due to the “safer at home” orders, now is the perfect time to ask what you need and see how we can help. In an effort to do so, I wanted to clarify what is True and what is False in terms of the mortgage relief available during this time.
TRUE OR FALSE: You can stop paying your mortgage for a year-FALSE.
Last week Congress enacted the Coronavirus Aid, Relief, and Economic Securities (CARES) Act that provides homeowners faced with a hardship due to the COVID-19 emergency with a right to forbearance. It has also blocked lenders from any foreclosure proceedings for at least 60 days. That started March 18th.
TRUE OR FALSE: The CARES Act is automatically applied to all homeowners-FALSE.
The provision allows homeowners with federally backed mortgages to request a forbearance for up to 180 days. You can then also request an extension for an additional 180 days. But the 2 key points are that your mortgage must be federally backed-so you must have an FHA/VA/USDA/Fannie Mae/Freddie Mac mortgage AND you must REQUEST a forbearance agreement from your loan servicer by attesting to being financially impacted by COVID-19. Be sure you get it in writing. Until that time, pay your mortgage.
TRUE OR FALSE: Your credit isn’t affected if you don’t pay your mortgage-FALSE, but also TRUE.
If you don’t pay your mortgage AND you don’t have a forbearance agreement in place (remember, get that in writing before you stop paying), then if you are late on your mortgage it will impact your credit. If you do have a forbearance agreement in place, part of the CARES Act is that those who receive mortgage forbearance will also receive credit protection as long as you’re up to date on your payments before you go into forbearance.
TRUE OR FALSE: Forbearance is loan forgiveness-FALSE.
Forbearance is just putting a pause on your mortgage payments for a few months. You may also hear it referred to as deferral. The details of your mortgage deferral or forbearance depend on your particular loan servicer. And, with some forbearance programs you may owe all your missed mortgage payments at the end of the forbearance period in one lump sum or as additional monthly payments to your normal monthly payment. So, at the end of your 180 days you’ll owe the entire balance? EEEEK! That doesn’t even get into the taxes and insurance that will still be due. So, there’s potential for your updated mortgage payments after the forbearance period to be much, MUCH more than what you’ve been paying.
To me, that sounds like the cure is worse than the disease (no pun intended). So being the mama that I am-a Mortgage Mama, that is-I have another solution for homeowners to consider: A refinance at this time would allow you to miss your next 2 mortgage payments, which may be able to provide some immediate financial relief during these uncertain times. And, due to unprecedented movement in the market, rates are back to historically low levels. So, even if you’re not immediately financially impacted by the COVID-19 emergency, you may be able to benefit in both the short and long term by reducing your interest rate, or the term of your mortgage, or maybe even take some cash out of the equity in your home.
The point is, before you make a decision to stop paying your mortgage payment, we’d love to hear from you to discuss your situation or even just to chat about what is going on in the market. You can contact us via call or text at 855.4YO.MAMA or via email TheMortgageMamas@YourFloridaLoan.com. Or, if you’d rather, feel free to click this ONLINE APPLICATION and your information will be sent immediately to us. As I mentioned before, now is the time to be proactive, not reactive. So, call your mama-your Mortgage Mama, that is.
Stay safe & wash your hands,