Recently the government has made statements about allowing people to put their mortgage into forbearance. Forbearance means that your lender allows you to either pause your mortgage payments or reduce them for a limited period of time during a financial hardship.

But forbearance does not come without strings attached. It is not a “free ride” in any way, shape, or form.We suggest you educate yourself BEFORE you inquire about your options.

I’m not saying that you shouldn’t consider forbearance, especially in a hardship, but you need to know the possible repercussions. Read the fine print and educate yourself. If you’ve thought about buying a house or refinancing your current home — or if you think an investment property or a second home is in your future — forbearance could prevent you from obtaining a mortgage approval.

Read the Fine Print.

Forbearance CAN affect your credit.

Once your forbearance is approved, it will show on your credit report, probably keeping you from mortgage approval for a minimum of 12 months after you resume payments. Even if you continue to make regular payments, the approval of the forbearance may be notated on your credit report, and possibly affecting your mortgage approval for 12 months.

Forbearance is NOT debt forgiveness.

In addition, forbearance is not a forgiveness of debt in any way. All of the interest and the payments will be due at the end of forbearance.

You may be required to repay all at once.

Depending on your loan servicer, whether your loans are federally backed — and by which agency — and the amount of the loan, there will be different requirements for how you repay what you owe. If you’re very lucky, you might get to “catch up” over time, either as additional payments or in a lump sum. Or your lender may add the amount you owe on to your resumed mortgage payments, so that your monthly payments increase at the end of forbearance.
But you may be required to pay what you owe in a lump sum immediately at the end of forbearance.

Beware of predators.

There are rumors circulating that servicing companies are reaching out to clients, offering forbeara

nce, knowing that the client cannot refinance their loan if they take the deal.

Know what you’re getting into.

This government response is different from the 2008–2010 mortgage subsidies.

If you have questions about forbearance, lenders, or anything to do with home financing, hit us up. You can call 205–986–4220, connect with us on social media, or ping our website. We are happy to help you in any way we can.

— Ben Chenault,
Certified Mortgage Planner
NMLS# 130305
MortgageBanc / Fairway Nmls# 2289

Copyright©2020 Fairway Independent Mortgage Corporation doing business as MortgageBanc. NMLS#2289.4750 S. Biltmore Lane, Madison, WI 53718, 1–866–912–4800. All rights reserved. This is not an offer to enter into an agreement. Not all customers will qualify. Information, rates and programs are subject to change without notice. All products are subject to credit and property approval. Other restrictions and limitations may apply. Equal Housing Lender. Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act, License No 41DBO-78367. Licensed by the Department of Business Oversight under the California Finance Lenders Law, NMLS #2289. Loans made or arranged pursuant to a California Residential Mortgage Lending Act License. Georgia Residential Mortgage Licensee #21158.

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