Mortgage Forbearance

sgip

Well-known member
Plenty of news noise about mortgage forbearance. Some words of advice here:

1) Never skip a payment, even if advised to do so. Make partial payments if possible.

2) If advised to do so, DON'T until you get the details in writing.

3) Ask your servicer "If I have a payment forbearance, what happens later to that amount I did not pay?"


During the last crisis there was very little written guidance on what the ramifications would be if you went into a loan mod or some other work out. Many people were harmed more by the cure than they were by the symptoms. Don't put yourself in that position and always demand something in writing before acting.

A major funding source for Mortgage Bankers sent out letters to their closed loan customers. Here is the key paragraph in this two page letter:

"What happens after a forbearance? At the end of your forbearance period, all payments not made during the forbearance period will have to be paid back. We will be in contact with you to review options fo repayment, such as:

A) Pay it as a lump sum.
B) Start a repayment plan - Over a set number of months, an extra amount will be added to your regular mortgage payment to cover the amount you owe from the forbearance.
C) Loan Modification - If you are unable to pay a lump sum or through a repayment plan, we will work with you on a loan modification"


This is the first letter I've seen so far that goes into details about the exit plan from forbearance. I'm sure every company will be different, but unless you get the details in writing, you may be setting things up for pain later on if you take a forbearance. If anyone had a loan mod in 2008-2010, then tried to get a new loan in 2014-2017, you know what I'm talking about.

If anyone else has gotten any written instructions on these plans, please share them here.

My ,02c
 
I believe those who take this forbearance will most likely put their suspended payments to the end of the loan. I'm not sure if this option is allowed for every bank doing this forbearance program, but I think that's the safest way if you're going to do this.
 
Adding the payments to the end of the loan may be possible with bank portfolio loans. An "Our Money, Our Rules" kind of thing. I've yet to see anything in writing on this, but for now let's assume this is the case.

It's technically not possible with Agency loans. Any missed payment over 3 months is an NOD. This is why either a lump sum, a graduated pay back, or a loan mod is being offered at this time.

My .02c
 
Wells Fargo is making this super simple.  A couple check boxes and you are automatically approved.  They don't have any clarity on how the repayment will be but it says that it won't show up as a missed or delayed payment. 

SGIP - is this what you mean by seeing something in writing? 

 

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SGIP - in writing they said no late payment, no foreclosure proceedings, no credit hit.  The worst I can see happen is that all payments are due immediately after the 3 months.  What am I missing? 

Obviously people don't gain much sitting on the 3 missed payments and having to back all 3 in one lump sum but I don't see a reason not to do it.  What are some situations you would be worried about?
 
That first screenshot of that Wells Fargo says after 3-month payment suspension, they will guide you to either -

1) Continue payment suspension
2) Move the missed payments to end of the loan
3) Mod loan - which could be one of the dangers SGIP is warning about

I guess number 2 would be the best option in most cases. That's also a pretty clear statement of how they will handle the repayment.
 
Soylent Green Is People said:
...you may be setting things up for pain later on if you take a forbearance. If anyone had a loan mod in 2008-2010, then tried to get a new loan in 2014-2017, you know what I'm talking about.

So accepting what Wells provided becomes a loan mod?  Or is delayed payments for a few months not a loan mod?  Did I do something crazy? 
 
rkp said:
Soylent Green Is People said:
...you may be setting things up for pain later on if you take a forbearance. If anyone had a loan mod in 2008-2010, then tried to get a new loan in 2014-2017, you know what I'm talking about.

So accepting what Wells provided becomes a loan mod?  Or is delayed payments for a few months not a loan mod?  Did I do something crazy?

A loan mod is the most likely outcome for these people, just as it was during the last recession.  Most lenders will want to avoid dinging credit to avoid the bad publicity, but modifications did affect some credit scores during the last go around, at least in the early years.  Likewise, some servicers will be slow to update their processes this time around, and will have poorly trained staff that weren't around 10 years ago.  Mistakes will be made.

SGIP is right; Getting it in writing is the smartest way to protect yourself.
 
Be sure to grab as much information as possible from the web, as it can be changed at anytime without the trail paper usually provides.

Although the 2020 financial crisis is not a 1-1 analogue to the 2008 financial crisis, ask anyone who accepted a loan mod what it was like to get credit later on. Remember that the devil is in the details. Today, right now, you won't have a credit report hit for the 3 (or more) payments in forbearance.

Does that same credit report protection extend to Loan Mods? Not from what I'm reading.... How these forbearance payments are reported to the credit agencies is one thing. How the FICO score models read this is another. Sure, there's no late payment, but if your loan reads MODIFIED BY LENDER there goes 200 points off your FICO score - in today's world. Tomorrow? That's another story.

No one knows for certain what the FICO models will do, nor what a 2020 modification might do. All one has is past experience to rely upon and take it from me, or anyone else to modded their loan - be careful before taking any step that isn't 100 percent in writing.

My .02c
 
This guy has a good video on the subject:
www.youtube.com
/watch?v=YWq8k78z5O8

Paste the entire link since the paste doesn't show the video here anymore.

There are others but he is easier to listen to than most.
 
From what I've been sent recently by a client, Bank Portfolio loans will have the forbearance payments added to the end of the loan. Example: If your payoff was June 2050, now it's August 2050. The 3 payments that have not been made will not be required to be paid in a lump sum, stretched out in a repayment plan over 12 months, or your loan reviewed as a potential modification candidate. As suspected earlier and now confirmed in writing, at this present time it's "our money, our rules" on how these forbearance payments are handled on portfolio loans.

At this time I'm not seeing any news on Agency or Government Insured (FHA/VA) loans that we made so know that like all other things - "You're mileage may vary" on this question.

If you've had a forbearance request granted, and if you don't mind sharing, please post what was sent to you by the servicer. It would be important to know what others plans and/or options are for these 3 missed payments once the 90 days have passed.

My .02c
 
Most people aren't going to be able to pay a lump sum or even handle a 12 month repayment if they've been displaced economically.  It's a loan mod or bust!
 
This mortgage payment deferment may cause a lot of issues for homeowners in the future with refinancing and new home purchases. I have already received new guidelines and policies today from many investors and lenders saying they will not approve loans, fund loans or buy loans in which the borrowers / homeowners whom had received help from this payment deferment program. Not sure how this is going to play out but be very careful. The government is making it way too easy for everyone with 1-4 unit dwellings to qualify for the payment deferment without much guidance for the investor and lenders.

Tony Nguyen  | NMLS#93776
Vision Quest Lending  | 2860 Michelle Drive, Suite 140, Irvine, CA 92606
Direct 714-464-8042  | 877-318-0992 x6502  | Fax 866-394-9352                                                   
Email | tony@vqlending.com                                                                   
Website  |  www.visionquestlending.com
BBB A+
Apply online:http://visionquestlending.com/free_quote/
 
Mortgage forbearance continues to be widely misunderstood and dramatically misreported, leaving many borrowers frustrated when they find out that they can't just "pause" their mortgage. A forbearance is not a deferment - they ARE different. Although some borrowers will be able to get a true deferment, pushing missed payments to the end of the loan, most will not (because mortgages are securitized and they can't change the bonds). Forbearance will require paying the missed payments at the end, or modifying the mortgage. Here is a video that might help explain with the Mortgage Forbearance Process:
https://originatorsuccess.fleeq.io/a/glzm11vtax-vs3t285cul?captions=1&narration=1

Tony Nguyen  | NMLS#93776
Vision Quest Lending  | 2860 Michelle Drive, Suite 140, Irvine, CA 92606
Direct 714-464-8042  | 877-318-0992 x6502  | Fax 866-394-9352                                                   
Email | tony@vqlending.com                                                                   
Website  |  www.visionquestlending.com
BBB A+
Apply online:http://visionquestlending.com/free_quote/
 
nguyener said:
I have already received new guidelines and policies today from many investors and lenders saying they will not approve loans, fund loans or buy loans in which the borrowers / homeowners whom had received help from this payment deferment program.

How would anyone know outside that particular servicer?  I have 4 loans under Wells and 3 under Chase.  If I stopped on all of them and paid in one lump sum after 90 days, I didn't really gain much outside of a 90 day interest free loan.  But if they end up adding that lump sum to the end or longer amortization, I improved my cashflow.  The downside is Chase and Wells might not want to lend to me in the future but that is 2 banks out of 100s.  Please explain why this would be bad? 

 
Other lenders and investor has ways to figure out if you are in a forbearance agreement like ordering your mortgage payment history or by looking at your payoff demand or even looking at your credit report could give them indication of some type of forbearance on your mortgage. 

Here is another article that help explain why forbearance has unintended consequences for homeowners.http://www.mortgagenewsdaily.com/mortgage_rates/blog/941222.aspx

Tony Nguyen  | NMLS#93776
Vision Quest Lending  | 2860 Michelle Drive, Suite 140, Irvine, CA 92606
Direct 714-464-8042  | 877-318-0992 x6502  | Fax 866-394-9352                                                   
Email | tony@vqlending.com                                                                   
Website  |  www.visionquestlending.com
BBB A+
Apply online:http://visionquestlending.com/free_quote/
 
RKP -  Let's work through the questions you have,

1) Unless you have written evidence that the loan payments ARE being added to the end balance, assume that everything is due and payable in 90 days. If you have that kind of scratch, probably best to pay and avoid the many issues ahead of you.

2) The Loan Servicers are not to put any derogatory information into a credit profile such as late pay information. It does not say that they can't add "loan in forbearance" or "loan modification in process". That's not a negative statement, but merely a statement of fact.

3) The very moment either of these statements are added, you become radioactive to lenders. Not just Chase and Wells, but everyone. Your FICO score will likely drop 100 or more points as well.

4) Let's say the credit profile DOES NOT say "loan in forbearance" or "loan modification in process". Many lenders will be asking for 12 months of cancelled checks to show an on-time payment. Do they have to rely on the credit report? No, not really.

5) Let's say none of that happens. You open a new loan with Quicken or Guaranteed Rate because "they have their own money" - well, actually, they don't. They have credit lines with Wells Fargo, Chase, and Citibank. What are the odds that these mortgage bankers will be checking your loan against a "do not fund" list of their credit line holders? I wouldn't take that bet.

This isn't a message to stop anyone from taking advantage of the CARES products and programs. I'm pleading only for you to get 100 percent of things in writing first. If you can't, don't take the deal.

My .02c

 
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