Before you contact your lender regarding a forbearance for your mortgage, PLEASE READ:
These are challenging times, whether you and your family are struggling through illness or job loss, or home-schooling children, in our era we have never had to deal with so many situations all at once.
The government passed the CARES Act (Coronavirus Aid, Relief, and Economic Security Act’) which allows for much needed assistance for homeowners. For those who have lost employment or are furloughed, (although the lender should not ask your circumstances) your mortgage can be suspended for up to six months, or longer.
But the saying goes, there are more twists in this act than a pretzel factory. First, there is no clear directive on how a forbearance will affect credit. Therefore, be sure you know the facts and GET IT IN WRITING FROM YOUR LOAN SERVICER.
If you are planning on purchasing a home in the near future, your mortgage may be notated at the bureaus that you were in forbearance, even if the lender did not report you late to the credit bureaus. Also, the delinquent payments may be reported missing from your mortgage credit history.
According to the FHFA on May 19th, 2020: “Borrowers are eligible to refi or purchase a new home if they are current on their mortgage-in forbearance but continued to make mortgage payments or reinstated their mortgage. Borrowers are eligible to refinance or buy a new home three months after their forbearance ends and they have made three consecutive payments under their repayment plan, or payment deferral option or loan modification.” But did not address how these actions would affect credit scores.
The CARES Act is like hugging a rose bush, because if you call your lender JUST ASKING FOR ADVICE, they could report you to the credit bureaus.
Unfortunately, the CARES Act is necessary, but this one seems to have been written with so many strings, we can’t find the beginning or the end.
For More Information:
The National Association of Mortgage Brokers sent the following letter to the Senate Banking Committee: https://cdn.ymaws.com/namb.org/resource/resmgr/letters/cares_act_deferral_of_mortga.pdf
The Consumer Financial Protection Agency recently posted the following: https://www.consumerfinance.gov/coronavirus/cares-act-mortgage-forbearance-what-you-need-know/