Ags,

My wife works in a profession that was affected by COVID-19 and as a result she's temporarily unemployed.

It is my understanding that many mortgage lenders (mine included) are offering assistance to individuals / families that have been negatively impacted.

Reading through the literature provided by mortgage company I see that:

"If you're unable to make your next payment or if you've already missed a payment, you can suspend mortgage payments for an initial period of 90 days (3 months) and up to 180 days (6 months), depending on your needs. This is called a forbearance. Under this program, you won't be charged any late fees, and your account won't be reported as delinquent to the credit bureaus as a result of enrolling in forbearance. No documentation is required from you to take advantage of this program."

I was under the impression that the missed payments would just be tacked on to the end of the loan. However, further readings reveal:

"After the forbearance period, you're expected to pay all suspended payments as a lump sum with your current month's payment. From then on, you'd continue to pay your normal monthly payment."


Doesn't this defeat the purpose of financial assistance?

It's not really financial assistance. They're just giving you a bit more time to pay.

I think they are going to have to offer the option to modify your loan at the end of this as most people will not be able to pay back a lump sum. I suspect accepting the loan modification will have a negative impact on your ability to borrow/refi in the future.

So another issue with this is that the servicers still have to pay the security holders even if they don't receive payments. There will have to be assistance provided to the servicers or we could have multiple bk's and a huge disruption to the mortgage industry.

To the first point, I don't see how a forbearance really helps most people. Its not like people that have their incomes hit are magically going to have a lump of money in three months.

Braxton,

I could see how a forbearance would help if the missed payments were extended on at the end of the loan. Especially, to people who have been furloughed. To your point, if mortgage companies are expecting people to repay their missed payments + current payment once their forbearance period expires ... not going to happen.

merlin403 said:

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Braxton,

I could see how a forbearance would help if the missed payments were extended on at the end of the loan. Especially, to people who have been furloughed. To your point, if mortgage companies are expecting people to repay their missed payments + current payment once their forbearance period expires ... not going to happen.

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Ya absolutely agree with "if the payments were moved to the back of the loan." Was not trying to say that I didn't, just that isn't what is mostly being offered right now.

I believe the CARES Act provisions are different than the previous Freddie/Fannie forbearance/deferral programs with regard to extending payments beyond the original maturity date.