Mortgage Forbearance Need-to-Know
COVID19 arrived in early 2020 and has adversely affected many of us financially and economically. For some of us, we struggle to make our monthly mortgage payments and sought for mortgage relief option such as mortgage forbearance. Thus, it is important to understand the pros and cons of this relief option. The payment relief through a forbearance plan offers a reduction or suspension of a homeowner’s mortgage payments up to 12 months, offered in increments of up to 6 months.
How does mortgage forbearance work?
Mortgage forbearance is not a payment forgiveness plan. It is a payment deferment program and the debt still have to be repaid. The exception being if a loan modification is necessary and possible, which may negatively impact your credit score moving forward. This, of course, will depend on whether or not the lender decides to report it to the credit bureaus. If the lender decides to report the forbearance to the credit bureaus, then you may not be able to qualify for new loans and/or refinancing because you have gone into mortgage forbearance during the pandemic.
What is the CARES Act?
It is important to understand the mortgage forbearance program outlined in the CARES Act. Unless it is absolutely necessary to use a mortgage forbearance option, it is recommended that you should conduct more research and weigh the pros and cons before making a final decision. In times like these, viable options may not be readily available, and if they are, then leave your options open and be flexible.
For more information regarding the CARES Act with respect to Mortgage Forbearance, please visit this website with the Consumer Financial Protection Bureau (CFPB). Make sure you talk with your lender regarding this option regarding its process and procedures.
The first rule of any option is to understand the pros and cons of that option prior to making an educated decision. The second is to always ask questions if you don’t understand something, even when the questions make us look silly. It is better to know than not to know.
Mortgage forbearance is not a payment forgiveness plan. It is a payment deferment program and the debt still have to be repaid.
We hope this information will help many of you. Your credit reports and scores play an important role in your future financial opportunities, so it is important to understand your options.