Forbearance?

By Etta Foote, All Western Mortgage

We hope that as you read this, you are all healthy and safe. It is certainly an unprecedented time in our history, but we are encouraged by the way family and friends have stepped up to ensure the safety of their family and others around them.

FORBEARANCE
The most frequent term that is being tossed around is “forbearance.” On the surface, this seems like a wonderful option, but many people think that forbearance equals forgiveness.

It is very important to consider what might happen when looking at mortgage options due to the Covid-19 virus. By now, most of you have likely read an article or even received a direct email from your lender or servicer regarding ways they can assist you if you lost your job or income during this very difficult and unknown time. While every situation is different and each household must review the options and do what is best for them, we want to make sure you are informed and armed with the knowledge needed to make an informed decision. After all, this is your financial future being impacted.

It does not.

Most of the lenders simply say that they will let you skip several months of mortgage payments. However, there are some details that need to be investigated and some questions we encourage borrowers to ask prior to committing to a forbearance. Most important is reading the terms of the forbearance. There are different types of agreements being made and not all lenders’ forbearance offers are the same. Please do not rely on past experience or a friend or family members’ experience to make your decision. A few questions to ask:

● Is there a balloon-type payment due following the missed payments?
● Will I still be responsible to pay the interest during the missed months?
● Will you be adding additional amounts onto my next few months payments once I return in order to make up for the missed payments?
● Will the missed payments, including accumulated interest be added to the end of the loan and how much is that total?
● Will this be reported negatively on my credit report?

The fact of the matter is, the very short-term relief can end up being very costly. It is also important to remember the value you have accumulated in the equity built over the last few very strong financial years. It would be sad to see the equity put at risk for a short-term relief option that ends up adding additional payments, and thus additional stress in the very near future.

Borrowers need to be careful not to dig themselves in a deep hole…so deep they can’t catch up. Should this happen, the lender will enforce their right to be paid, which may cause the borrower to be foreclosed upon, or forced to file chapter 13 bankruptcy. You could lose all the equity in your home in the process if you’re not careful.

MORTGAGE RATES

Lastly, many people who did not take advantage of the low mortgage rates have seen rates skyrocket in the last week or so amid the corona virus news. I have had many questions as to why. Well, as the news of all-time-low rates spread, and consumers took notice, lenders received many months’ worth of refinance applications in just a few weeks. Lenders soon had no choice but to artificially and dramatically increase rates…they reached capacity and simply couldn’t handle the volume. The result: Rates shot up! The one message I share with borrowers who want to hold out for a better rate, “Rates are fast to go up, but slow to come down.” So, the question is will low mortgage rates return?

While there is a chance of that, the analysts predict that we won’t see low rates again until at least June. Still, I have been telling many of my clients that we should be ready to secure a low rate if the opportunity presents itself. From my experience as a Loan Advisor, I know that uncertain economic times often bring about low mortgage rates. My advice: Apply Now and lock when we have a day of ultra low rates.

As always, we are here to help you in any way we can. We are still working and for some of you, this may be a good time to buy, upgrade or refinance. For others that are doing your best to weather this uncertain time, we are here to help answer any questions you may have or to help make sense of any offers you may have received. Please stay in contact, keep us informed and do not hesitate to reach out with any and all questions you might have regarding your mortgage.