This is a very important message regarding forbearance. Hi I’m Kimberly Ritter, Broker Associate/Realtor with Homes by the Ritter Group at Carolina One Real Estate. I hope you and your family are healthy, and finding some time to enjoy each other during this time. Since the CARE Act was released I have heard many talking about not having to pay their mortgage. Remember Forbearance is not
Forgiveness. Let me first say this is not anyone’s fault. If you have been laid off and can not pay your mortgage please reach out to your lender and talk with them. But It’s important to understand what you may be signing so Let’s do some ‘mortgage forbearance math’.
Ann and John have a mortgage currently at $2,500 per month. John loses his job and gets laid off from work. John hears the “News” about forbearance and how if you’ve been negatively impacted by COVID-19 that banks have to work with you.” Excited, John calls the Mortgage Servicer, and inquires about the Forbearance he is entitled to. This is great relief for now because he doesn’t have to pay his mortgage for six months. But let’s fast forward to Seven months later, John is back to work, but for the past 6 months he wasn’t able to save any additional money because he was out of work during the forbearance period. And the Forbearance timeframe of six months is now up and the Bank, or servicer sends John and Ann their bill. Ann nearly falls over because the bill shows Ann and John owe $15,000 + $2,500, and it’s all due right now on the seventh month. So $17,500 Seventeen thousand five hundred dollars is what is owed. John is shocked and calls and asks the Bank, “WHY??” So Let’ start the dialogue –
Bank: “That’s the 6 months of forbearance ($2,500 x 6) plus the current month of $2,500” Totaling $17,500 Seventeen thousand five hundred dollars in total is due now.
John: “Well obviously, I haven’t been working and I don’t have that kind of money. I can’t pay that, Is there anything I can do, can we renegotiate?”
Bank: “Sure, we will spread out the $15,000 over 12 months.”
John: “Great….thanks so much. “How does that work?”
Bank: That will be $3,750 (three thousand seven hundred fifty dollars each month for the next 12 months.”
JOHN: ” What!!! I don’t understand, WHY? Bank: “$15,000 Fifteen thousand divided by 12 months = $1,250 One thousand two hundred fifty dollars. $1,250 One thousand two hundred fifty dollars of the 12 month payment plan) plus $2,500 twenty five hundred dollars (for each monthly mortgage) = $3,750 Three thousand seven hundred fifty dollars per month (for 12 months)”
John: “I can’t afford that.”
John: “Can I refinance?”
Bank: “No because the loan went into forbearance (& you have an ‘unsatisfactory recent mortgage payment history’ in the eyes of Fannie Mae & Freddie Mac’s current underwriting approval guidelines”)
John: “What can I do?”
You see, Forbearance is not forgiveness. You owe the bank your payment Whether it is at the end of a few months, or if it’s at the end of the lifetime of the loan, it will have to be paid back. We need to make sure that we are correctly giving out information regarding Forbearance. You will have to pay it back at some point so make sure you understand the entire process. Just remember, there isn’t such a thing as “Free” as of right now when it comes to Forbearance. The Mortgage Servicers cannot sustain this prolonged period of “fronting the money you don’t pay them during the forbearance period” and will need to seek restitution somehow. Speak with the correct people, ask the right questions, read the fine print. While forbearance might be the only option for some, it should not be pursued unless absolutely necessary. Other options may be offered by the Mortgage Servicer (such as deferring the entire amount due to the “back of the loan”), but assumptions should NOT be made without written clarification. Bottom line, know what you are agreeing to and work with a VERY experienced Realtor and Lender who partners together to protect you and give you accurate sound advice.
Please feel free to reach out to my team and I for any advice at all, let us help you navigate these tough times or guide you to the right direction. Much love and affection your way. Kimberly Ritter and The Ritter Group