How Will Taking Advantage Of Forbearance Affect My Ability To Refinance

Documentarys on Netflix have been preparing us for this moment for a decade.  That being said, I don't believe we are ever going  back to the way things were before. It may not be a bad time to pay fees to get a 3% rate on a 30 or 2.5% on a 15 year. 

AS YOU ARE AWARE, MANY INSTITUTIONAL LENDERS ARE ALLOWING FOR FORBEARANCE (DEFERRAL OF MORTGAGE PAYMENTS) PROGRAMS.    HOWEVER, NOTE THAT THERE IS A BIG NEGATIVE TO GETTING ON A FORBEARANCE PLAN THAT YOU SHOULD BE AWARE OF.

While nothing is official on this subject as of yet, it is becoming very clear that if you go on one of these lender programs, it will be reported to the credit bureaus, and it will adversely affect your credit scores. 

It's hard to say how much your scores will go down, but even more importantly, you will be precluded from obtaining institutional financing for up to a year, and maybe 2-3 years, as the lenders will view this as a “black mark” on your credit profile that will take 1-3 years to heal.  Hence, before you go on a forbearance plan, we recommend you seek other alternatives to stay current on your mortgage payments, such as making them from savings, borrowing from friends/family temporarily, borrowing against your retirement plan temporarily, getting a HELOC not to cover your financial needs to tide you over until this economic calamity passes, etc.   

Expanding on the idea of borrowing from your retirement plan, AS PART OF THE CARE ACT, YOU CAN BORROW AGAINST YOUR RETIREMENT PLAN (IRA, 401k PLAN, PENSION PLAN, ETC.) PENALTY FREE FOR UP TO 3 YEARS AS I UNDERSTAND IT.   AS LONG AS YOU PAY THE LOAN BACK WITHIN THREE YEARS, YOU WILL NOT BE PENALIZED FOR TAKING IT, PLUS YOU WOULD BE PAYING YOUR PLAN THE LOW INTEREST RATE THE LOAN WOULD COST YOU, SO YOU ARE EFFECTIVELY PAYING YOURSELF.  We feel this is a much better alternative for you to consider than going on a forbearance plan.   A forbearance plan should be a last resort.

There are many experts predicting that we could see the best mortgage rates of your lifetime in the coming year(s).  Do you really want to preclude yourself from refinancing or buying another home if that occurs because you went on a forbearance plan?

for·bear·ance

/fôrˈberəns,fərˈberəns/

Learn to pronounce

noun

1. patient self-control; restraint and tolerance.

   "forbearance from taking action"

   Similar:

   tolerance

   toleration

   patience

   resignation

   endurance

   fortitude

   stoicism

   long-sufferingness

   leniency

   lenity

   clemency

   indulgence

   restraint

   self-restraint

   self-control

   moderation

   temperance

   mildness

   • LAW

     the action of refraining from exercising a legal right, especially enforcing the payment of a debt.

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Homeowners hurt by COVID-19 can delay mortgage payments, but some say they're anxious and confused about the real cost

Americans struggling to pay their mortgages because they've lost a job or income during the coronavirus pandemic can put off that bill for up to a year due to the CARES Act. But while the measures should be creating a feeling of relief, many borrowers have been left anxious because of confusing messages from the government and banks.

Some homeowners say Wells Fargo, Bank of America and Chase have told them they have to repay those postponed payments – known as forbearance – in a lump sum once three months are up. It's an unexpected demand they fear could put them deeper in debt as millions are laid off and watching their retirement savings plunge with the stock market.

Anthony Adams is one of the uneasy Americans who is confused and worried about the rules. He is late on his mortgage payment to Wells Fargo after the coronavirus pandemic crimped sales at his family’s bakery in Orlando, Florida, forcing him out of a job.

Wells Fargo offered Adams a 90-day deferment on his mortgage, which is backed by the U.S. Department of Veterans Affairs, but the 49-year-old was surprised when Wells Fargo told him he’d still owe three months' worth of payments – plus the current month – once that forbearance period was up. Adams declines to say what his payments are.

“I feel like I’m in this odd Catch-22," Adams says. "I can get some immediate relief from postponing a mortgage payment, but the cost of that relief will put me further into debt.”

Why the surprise? It's a combination of evolving, sometimes conflicting rules depending on who owns the mortgage and many borrowers not understanding those rules.

Experts are concerned about how this will play out for borrowers over the coming months, even after the recently enacted relief package from Congress, called the CARES Act, which allows many people to delay their mortgage payments for up to a year.

“The problem with the CARES Act is that it doesn’t make clear how borrowers pay back the money during a forbearance period,” says Shamus Roller, executive director at National Housing Law Project, a nonprofit legal advocacy center.

"There’s a chance that something could go wrong in that process," he says, "and it requires a lot of interacting with servicers that are overburdened with calls.”