A few days ago, I shared some vital information with you about whether to defer your mortgage or rent payment while we are dealing with Coronavirus Roseville Sacramento issues. I have more information for you on this topic, called by some a Coronavirus mortgage payment holiday, and wanted to share it with you – to help your protect your homes, credit, and budgets!
Once again, Rodney Anderson, an excellent lender at Big Valley Mortgage, sent me a great email and shared important info with us and I'm greatly appreciative of it! And once again, I'm sharing important disclaimers – this time at the bottom of this article. Just click here to see them. 🙂
BE INFORMED…BE CAREFUL!
IMPORTANT TO READ! What the media doesn’t tell you about Coronavirus Mortgage Payment Holiday.
‘Mortgage forbearance math’.
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Mom and Dad have a mortgage.
It's currently $2,500 per month.
Dad gets laid off from work.
Dad hears all of the media reports that “Mortgage Lenders must grant you a forbearance if you have been adversely impacted by COVID-19 in any manner.”
Dad calls the Mortgage Servicer, and demands the forbearance he is entitled to.
In one phone call, he gets “6 months off” from paying his mortgage.
Seven months later, Dad is finally back to work, and hasn't been able to save any money during the forbearance period.
Forbearance is now lifted and Servicer says, “You owe $15,000 + $2,500, which is now due”. ($17,500 total due THIS MONTH!!!!)
$17,500 Due – NOW!
Dad almost passes out and says, “WHY??”
Servicer: “That's the 6 months of forbearance ($2,500 x 6) plus the current month of $2,500”
Dad: “I can’t do that, can we work something out?”
Servicer: “Sure, we will spread out the $15,000 over 12 months.”
Dad: “Phew….ok, good. What will that look like?”
Servicer: That will be $3,750 a month for the next 12 months.”
Dad: ” WHAT!!! WHY?
Servicer: “$15,000 divided by 12 months = $1,250. $1,250 (12 month payment plan) + $2,500 (typically due) = $3,750 (for 12 months)”
Dad: “I can't afford that.”
Servicer: “Sorry…”
Dad: “Can I refinance?”
Servicer: “No because the loan went into forbearance (& you have an ‘unsatisfactory recent mortgage payment history' in the eyes of Fannie Mae & Freddie Mac’s current underwriting approval guidelines”). Your FICO score may not be adversely affected but your payment history will still show months without payment.
Dad: “What can I do?”
Painful silence on the other end…..
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Forbearance is NOT forgiveness!
In a nutshell, this is forbearance folks. Forbearance is not forgiveness. {And it's not a real holiday either, even if some DO call it the Coronavirus mortgage holiday!}
We are resharing this information because we are still getting a lot of questions (and I am seeing some highly irresponsible “advice” from the media and people (who shall remain nameless) on social media…
Please understand the seriousness of this potentially catastrophic decision many of you (and those whom you care about) are considering.
The golden rule of economics is “there is no such thing as a free lunch.”
The Mortgage Servicers cannot sustain this prolonged period of “fronting the money you don’t pay them during the forbearance period” and will need to seek restitution somehow.
Unlike the Mortgage Crisis in 2008, nearly everyone has equity in their homes nowadays. The logical solution will be for the Mortgage Servicers to pursue foreclosure on your home to recoup their money. While there is no guarantee what the Mortgage Servicers will do on a case-by-case basis, this possibility should be known up front.
Mortgage Interest Rates will likely be low for the majority of 2020…don’t allow media headlines to persuade you to take the wrong path and disqualify yourself from refinance eligibility…or worse…cause you to lose your home.
Hopefully we all learned from the last housing crisis how dangerous it is to take advice from people who are not qualified to provide it. None of these people will help you pay your mortgage once you discover you are in trouble.
While forbearance might be the only option for some, it should not be pursued unless absolutely necessary. Know the facts before you act
I am always available to answer any questions for you and your clients.
Take care and be safe.
Rodney Anderson, Big Valley Mortgage, 916-223-2058, [email protected] BRE #01785739 NMLS #220651
Disclaimers
**Although highly unlikely, other options may be offered by the Mortgage Servicer (such as deferring the entire amount due to the “back of the loan”), but assumptions should NOT be made without written clarification AND could cost you much more than the norm in extra interest.. ***Information originally provided by, & words borrowed from, Jason Gordon, MLO
And still more of those all-important disclaimers for this important info for homeowners and renters dealing with the issues of Coronavirus Roseville Sacramento and beyond ! These views are, for the most part, his and they are his personal opinion (along with some of my comments as well). NEITHER of us is prophets. We are making guestimates based on prior happenings and personal experience, along with researching various experts. PLEASE BE SURE to consult YOUR ATTORNEY, CPA, etc. for your own personal situation. (If this was a recording – I'd have them say it REALLY FAST like the TV. Well, no I wouldn't – I want YOU to be well educated, unlike most of the TV ads and shows. 😉 )
I did find a couple of other articles that also help shed more light on this topic. Check these out:
- Are you a homeowner seeking forbearance on your mortgage? Watch out for these red flags – includes questions to ask if you apply for mortgage assistance
- Homeowners hurt by COVID-19 can delay mortgage payments, but some say they're anxious and confused about the real cost – as well they should be! And this article includes the VITAL reminder to get EVERYTHING in writing – and read everything CAREFULLY!
As we deal with the Coronavirus in the Roseville Sacramento area, it's vital to stay calm, follow the procedures, and be extra cautious with our plans and expenses. For those who are still able to work – whether at home or at your work location, I would encourage you to definitely keep paying your mortgage payment. Some may call it the Coronavirus Mortgage payment holiday – but again, it AIN'T NO HOLIDAY! A major HEADACHE would probably be more appropriate.
BUT if you are out of work and have NO WAY to make your payment, THAT is what it is there for. Be sure to contact the office in charge of your mortgage as soon as possible. Not sure who that is? Check your payment stubs – or check out the resource links in the paragraph above as they have great tips on how to track your mortgage company contact info. You might be stuck on the phone for a while. Maybe even a VERY LONG WHILE. But communication is KEY in a situation like this.
Yes, this applies to boomers and seniors as well – maybe most of all. Generally speaking, we have less time to pay off that mortgage and often, less income to do it!
And hang in there. The news about the coronavirus itself, here in America, has been fairly encouraging the last couple of days. Hopefully this quarantine will end soon! 🙂
Kaye
