UNDERSTANDING “MORTGAGE FORBEARANCE”
COVID-19 has led to some challenging times for all of us.
The Government has created the CARES Act, to assist homeowners whose income may have been adversely impacted by COVID-19. One of the components of the CARES Act is the possibility of mortgage forbearance.
Forbearance is often misinterpreted. And while intended to help, it can have unintended consequences. Many people mistakenly believe that forbearance equals forgiveness; payments being waived. It does not.
Forbearance means that payments will be suspended for a short period of time (initially up to 6 months), but will need to be paid when the forbearance period ends. This is in addition to paying current payments; payments due at that time, unless the loan servicer (the mortgage company that you currently make your payments to) agrees to a payment deferral or mortgage loan modification.
Think about those offers you’ve likely seen from furniture stores or car dealers that state, “No payments” for 3 months. You must still pay for the furniture/car … the payments are just deferred.
But mortgage forbearance is even worse if the borrower has dug themself into a deep hole and cannot catch up. Should this happen, the loan servicer will enforce their right to be paid, which may cause the borrower to be foreclosed upon. They could lose their home and all their equity in the process.
Forbearance is designed to help those in dire need as a temporary measure; a last resort. It is not a free pass and may have serious consequences.
Topics: Mortgage Payments, Corona Virus, COVID-19, Mortgage Forbearance, CARES Act
