What is Forbearance and What To Do After a Forbearance?

Let's first understand what is forbearance. A forbearance is a mortgage relief program for homeowners struggling with financial hardship. A forbearance is a pause or reduction on your mortgage payments. The terms of a forbearance agreement are negotiated between the borrower and the lender.

Forbearance and The COVID-19 Situation

A forbearance was made available to homeowners that were impacted due to issues caused by COVID-19. Many homeowners lost income and even businesses causing them an issue paying the mortgage on their homes. During the forbearance program, it allows the loan payments to pause with no late fees. As a result, homeowners under financial distress were able to keep their homes during this time of economic upheaval. 

Some of these affected may now have stabilized incomes and are ready to exit forbearance. They might be wondering if they will be penalized for this if they choose to refinance or buy a new home. Fortunately, there is good news for these homeowners. Part of the forbearance program is that the lender will not report these late payments to the credit bureaus so the borrower will not have that issue to contend with when they are ready to find a new loan. 

What Now?

What happens with the missed late payments? It depends on what the lender and you as the homeowner work out. Lenders understand that this is a unique situation and that it is not representative of the way a borrower will make payments in the long run. There are 3 things that can be worked out. The key is to communicate early and honestly. The lender can refinance the loan, the missed payments can be added to the end of the loan or they could require you to make up the missed payments in a lump sum.  

If you find yourself where the negotiations are not favorable after a forbearance, call Treu Group Real Estate to help protect your real estate equity. It's important that you stay protected and are guided through other options that you can have. COVID-19 has impacted many people's lives in many ways. Fortunately, the lending community and real estate professionals have taken unprecedented steps to ensure the long-term damage to individuals and housing is minimized as much as possible.