We get it, these are challenging time, with stay at home ordfers, reduction in hours, and job loss, making your house payment can be a challenge for many people.
As part of the CARE ACT, the government has forced lenders to offer forbearance to anyone who asks WITHOUT requiring proof of hardship. A better understanding of forbearance would be to say "short term pause."
Both lenders and the National Association of Realtors are working diligently to educate people on proper uses of forbearance. (See NAR’s recent FAQ)
Forbearance should only be used by homeowners who are genuinely in distress and cannot afford to make payments. The program is NOT intended as a stimulus, Missed payments are not forgiven, but simply delayed and will need to be made up.
Widespread forbearance is causing lenders to raise requirements on new home buyers, and interest rates. High use of forbearance unnecessarily, this will cause lenders to pull back further, making it even more difficult to buy and sell homes.
IMPROPER USE CASE EXAMPLE
I just took an application from a client for a new home purchase yesterday (4/21/2020). They didn't say anything at first, but their credit report showed the current mortgage loan in forbearance. When I inquired about it, I was told the one was on furlough until the Government reopens the state. She heard about the forbearance option, called her lender, and got the forbearance (pause) in 5 minutes over the phone with no questions asked.
When I asked if they were in financial distress, they said no (remember, they are wanting to buy a new home).
They further indicated the one out of work temporarily was receiving both unemployment AND the $600 a week federal money, and therefore actually bringing home MORE than the lost income!
I asked why the forbearance request. The answer? Simply because it was an option.
I asked if they understood repayment options. They indicated they never asked, and were never told.
When I informed them how payback works, they went into immediate panic.
I've created a COVID 19 Real Estate and Mortgage resource page with more information. Find it at https://joemetzler.com/covid19/
Equal Housing Lender. NMLS 274132, 322798. Cambria Mortgage lends in the following states: MN, WI, SD, ND, IA, FL, TX, CO, This is not an offer to lend or to extend credit, nor is this a guaranty of loan approval or commitment to lend. The information here may not be up-to-date and may no longer be accurate. Products and interest rates are subject to change at any time due to changing market conditions. Actual rates available to you may vary based upon a number of factors. Consumers must independently verify the accuracy and currency of available mortgage programs. All loan approvals are subject to the borrower(s) satisfying all underwriting guidelines and loan approval conditions and providing an acceptable property, appraisal and title report. (C) Joe Metzler