Is The Forbearance Plan Working For you?

The forbearance plan, the deferral payment plan, and the reinstatement plan are the “Protection” to homeowners with federal-backed mortgages appointed out by the CARES act to minimize the damage COVID-19 is causing in Portland and across the USA.

Perhaps, the act allows homeowners to request a loan forbearance to deferrer their mortgage payments for up to 180 days, and potentially for an additional 180 days. This only applies to federal-backed mortgages such as FHFA, VA, USDA, Fanie Mae, and Freddie Mac. 

The act doesn’t rule the mechanisms that banks and lenders must apply. Lenders should report the missing payments to the credit bureaus as no delinquent. But in the long run, banks and lenders “may” use that information to qualify the homeowner’s future loan requests.

The CARES act doesn’t protect conventional mortgage loans. In case a homeowner with a conventional loan requests a forbearance plan. The loan servicer has the power to decide if he or she is approved.

Better Off Home Buyers surveyed loan servicers in Portland. We found some advantages and disadvantages to having a forbearance plan.

Advantages:

Federally-backed mortgage.

  • 180 days forbearance is grated. (No mortgage payments)
  • No documentation is required whatsoever.
  • The forbearance applicant is approved on the spot.
  • No fees or penalties.
  • No report to the credit bureaus.

Non-federally-backed mortgage (Conventional.)

  • Most of the interviewed loan servers offer 90 days forbearance plans. 
  • No documentation is required.
  • The forbearance applicant is approved on the spot.
  • No fees or penalties.
  • No report to the credit bureaus.

At the end of the forbearance term, homeowners have other options, but that varies by lenders. In all cases, we recommend reading the agreements paperwork fine print.

Disadvantages:

  • Federally-backed mortgage.
  • There is not reporting to the credit bureaus by your lender. This lack of reporting could potentially harm your credit.

Some lenders give us the following communication.

We will no be reporting the delinquency status, or the entry onto the forbearance plan to credit reporting agencies during the term of the forbearance plan (3 or 6 months period)

Credit reporting insists may consider whether there is an increase in credit risk due to the lack of reporting. We are uncertain as to the impact of your credit score.”

  • You have to pay for these missing payments at a later point on time.
  • What happens at the end of the forbearance term?

We received the following information from some lenders:

Before the end of the forbearance plan, we will contact the homeowner to discuss his situation and provide information and options that may be available to him. Options to resolve the delinquency may include a reinstatement plan, a repayment plan, or a loan modification plan.

A reinstatement plan option: You have to pay all at once (Slum Payment.) A balloon payment for all your miss payments (Principal and Interests.) 

Repayment plan option: We didn’t receive clear information about this plan, about how long it is, and how much are your payments going to be? 

Loan modification option: Definitely, It looks like the best option for you. This plan takes your missing payments and tacks them at the end of your loan,  but still, you will have the same interest rate and payments. Some lenders would adjust the interest rate.

The big question mark is: Will homeowners be able to write a big check to cover their forbearance period?  How many people are going to have the ability to do this after being unemployed, Laid off, or furloughed?

Also, our source lenders give us the following information:

At the conclusion of the forbearance plan, if the homeowner is not able to reinstate his loan in full, we will work with the homeowner to determine what assistance option he may qualify for. He may require submitting an application for assistance. The potential options include a repayment plan or loan modification.”

After The Forbearance Period.

If you took a Coronavirus hardship break and suspended your mortgage payments, contact your lender right before your forbearance plan ends.

Depending on the kind of loan you have, you can request an extension. According to the Better Off Home Buyers research, an extension for a non-federally backed (Private loan) mortgage loan depends on 100% on your lender’s decision. Homeowners with a conventional mortgage have a small chance to be approved for a forbearance extension or a loan modification. 

We believe that in the homeowner’s favor, banks don’t want to have a big house inventory, their business is “money making money,” in fact, for banks, owning houses means losing money.

Many lenders would offer an interest rate higher than the actual rate a homeowner may have. Depending on the program your servicer has, you may change the terms of your loan or not.

If you have a private lender, any forbearance developed to you will be at the discretion of that lender. If you inform that you continue suffering from a pandemic related income loss. Ask for a forbearance extension that would be a good bet for you.

If a forbearance extension is unavailable to you, then you will be looking at two scenarios. One is your inability to resume monthly mortgage payments, eventually, your lender will foreclosure on you. In the other scenario, if you have a place to go, where according to your income ability you can afford it. Consider the possibility of selling your house.

Selling Your House In Forbearance.

While you are in a forbearance mortgage plan. Yes, that is one of the options you can do to pay off that forbearance. However, there are a lot of people that may reach the end of their forbearance, and they are not able to continue making payments. Whether is continuing where they left off through the deferral, and they are not able to continue to make the same payment they had before, because of the unemployment or forethought. Or maybe, because there is just a change in circumstances where they are unable to pay that, and their only option is to sell their house.

After the forbearance plan ends, many homeowners continue with the inability of doing mortgage payments. Selling the property sounds like a good option. However, hiring a real estate agent will prolong the selling process, and it may put you at a bigger risk of foreclosure by your lender.

Better Off Home Buyers will buy your house. Our process of purchasing homes is easy to understand, clear, and fast. Our clients control the selling transaction time. If you need to sell your house because that is the best option to end your forbearance plan and because you want to prevent yourself from facing foreclosure. Let us help you.

In our experience, many homeowners got more money in their pockets after selling their houses to us than the amount they would receive if they sell their properties through a real estate agent.

Have in mind that selling your house in the regular market takes time. You need to take a lot of money out of your pocket to pay the agent’s commission, home repairs, legal, and closing fees. 

A forbearance tenant-occupied house.

If the house you want to sell is your forbearance rental property. No real estate agent will take your business. Real estate agents do not deal with such ordeals. The majority of them don’t have the knowledge and the experience to manage house selling situations where tenants are involved.

Be ready to be rejected if you want to hire a real estate agent to sell your rental-occupied property. 

Our company Better Off Home Buyers is a professional home buying company that counts with well-trained professionals in all the home buying aspects. Our legal team supervise every single process to guarantee the best results for our clients

Our home buying process starts when a client contacts us. You as a home seller will be face to face with us. You will be negotiating directly with a Better Off Home Buyers decision-maker executive. This means we can do an offer for your house right after we conduct an inspection.

If you accept our offer, the closing will be in about 7 days. The closing time depends on circumstances, but in many cases, it has been only 2 days.

The COVID-19 had triggered a bunch of unexpected situations for Americans. In Portland, on top of the pandemic effects, we are suffering the rioting that is going uninterrupted for months. Add to that the forest fires and the growing-uncontrolled homeless situation.

Contact us by filling out the form on this page, or dialing directly (503) 212-9641.

If you need to sell your house, we have a win-win process for your needs.

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