Forbearance. Make the call.

A forbearance is a loan relief agreement offered by many loan servicing institutions for temporary postponement of your mortgage payments.  The loan servicer agrees to delay foreclosure proceedings and negotiates a repayment plan for the missed mortgage payments.  It might look mean and scary but it’s not!  Foreclosures are expensive for lenders and services and well as borrowers.  They’d rather help you stay in your house than the alternative. 

A few terms to understand.  You may have gone through the loan process with a MORTGAGE BROKER such as Multiline Mortgage Services who shopped for a loan program and lender that would best fit your circumstances.  You may have closed your CONVENTIONAL loan with a LENDER such as Quicken who used their own money to fund the loan.  To recover money used for funding your loan, Quicken will sell the loan to Fannie Mae or Freddie Mac in order to have money available for another borrower.  You might hear things during your loan process such as “that doesn’t meet Fannie guidelines.”  Now you know why a loan must meet Fannie guidelines.

Now, although the loan was sold to Fannie Mae, the SERVICING rights may have been retained by Quicken.  The SERVICER is the company you make your actual mortgage payment to.  For a time, you might make your mortgage payments directly to Quicken.  However, they can sell the SERVICING rights to another company that will collect the mortgage payments and manage your escrow account.

As this relates to FORBEARANCE, you need to speak with the company that has the mortgage payment SERVICING rights.  During Hurricane Irma, some servicers were allowing borrowers to forego mortgage payments for 90 days then added those payments to the backend of their loan.  This plan may not be available with every servicer, but it’s worth asking.  Another solution they may offer is to increase your mortgage payments for a certain amount of time until the missed payments have been made up.  It depends on the servicer.  The important message here is TALK TO YOUR SERVICER AND MAKE A PLAN BEFORE YOU STOP MAKING MORTGAGE PAYMENTS!  Protect your credit, your home and your family.

COVID-19 Provisions

Fannie and Freddie released essentially identical sets of guidelines for borrowers and lenders about single-family mortgages:

  • Homeowners “adversely impacted by this emergency,” in the words of Fannie Mae, “may request mortgage assistance by contacting their mortgage servicer.”

  • Mortgage forbearance provided to reduce or suspend payments for up to 12 months.

  • Foreclosure sales and evictions suspended for 60 days—Freddie Mac lists the date as “at least May 17, 2020.”

  • Lenders must suspend reports to credit bureaus of past-due payments for borrowers in a forbearance plan

  • No penalties or late fees for homeowners in a forbearance plan

  • After forbearance, lender is mandated to “work with the borrower on a permanent plan to help maintain or reduce monthly payment amounts as necessary, including a loan modification,” states Fannie Mae.