Dear Claire: Can I Get a Mortgage Forbearances During COVID-19?
Navigating The Cares Act 2021: Understanding Mortgage Forbearance and Its Implications
I’m sure you’re probably aware of what is called The Cares Act 2021. It recently passed through Congress and there were some increases in unemployment benefits. There was also a big part of the bill that addressed people’s mortgage payments.
If you lost your job, Congress set up a system whereby your payments could be in essence postponed. It’s called the Cares Act first, and there’s a portion of the forbearance that’s pertaining to mortgages in general. Loans must be government-backed so that would be a Freddie or Fannie Mae product. In both of those instances, you can go to servicer, which is the person that you’re actually making the payments to. What you probably don’t know is, they aren’t actually the person that’s holding the loan itself. If I’m making payments to Wells Fargo every month for my mortgage that’s the loan servicer. So you would go to would go to Wells Fargo and say, “Hey Wells, I lost my job and I need to put my loan and my mortgage into forbearance now.”
Things you need to know is for the first 180 days you don’t have to prove anything. You can just say, “Hey, I need this and will give it to you on the backend. What’s going to happen is you’re allowed that forbearance for 180 days and there is as long as it’s Fannie [Mae] or Freddie [Mac] and one home with up to four units and you’re living there. You should be allowed to do these forbearances and there should be no additional interest. There should be no additional fees. In essence, what they’re doing with this program Is there tacking it all on the end of your loan.
Let me just give you an example because this can become really difficult to understand. Let’s say I couldn’t make my payment in April, May, and June and then I got a job in July and we are good. I started making payments again in July and did so for the rest of my mortgage payments. So, I have three months that I haven’t paid. In essence, what they’re going to do is to take that lump sum. Let’s say my payment is $1,200 a month. Well, let’s say it’s $1000 because the math is easier. So that would be $3,000, they’ll take that $3,000 and tack it onto the end of your mortgage. If my mortgage was going to be paid off in full in 2040, then I’d have those additional three payments and that would be three months longer of my mortgage.
What you need to know about this is right now is that it’s not affecting your payment or your credit. But for lenders, if you go to refinance or if you go to buy another property, they will not lend to you if your properties are in forbearance. So be aware you have to resolve that forbearance in its entirety for you to be eligible for any new loans. It’s really important that you know this and that going forward you’re not going to be able to refinance your property if you are in forbearance.
There is a bunch of more information about all of this and I am happy to talk to you about it because it is a new world to navigate. There’s a lot of questions and, frankly, I don’t have all the answers, but I might be able to get you to somebody who does so, please let me know. Just direct message me or reach out. You can call me and I’d be happy to help you. Of course, if you have any other real estate questions that you’d like me to address, just message me. I’m happy to address anything you like. Of course, remember to subscribe to the Paris Group Realty, LLC YouTube channel, where we’ve got all kinds of additional information for you. If you’re thinking about buying or selling, anything that you might want to know about it as far as real estate goes, we’ve got it over there for you. I hope you have a wonderful day and we’ll talk soon. Take care.
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