Mortgage forbearance is temporary. This is a very important concept that everyone choosing to defer payment using forbearance needs to fully understand. I write this because there is a mountain of misinformation currently flooding the internet and other sources. Misinformation can lead to bad choices. Based on this, I recommend that anyone considering mortgage forbearance, whether it be to weather COVID-19, divorce or any other life disruption, have a plan for management and resolution, as well as an understanding of the impact.
What Is Your Servicer Offering?
Many lenders are currently making forbearance as simple as selecting the dial pad on your phone or a checkbox on their website. Some downloadable PDFs or pages accompany this by laying out the basics. You should either print them out or save them to a thumb drive. This is a snapshot of what that servicer was communicating on the day that you selected forbearance.
If you have more detailed questions and opt to speak to a representative, log everything about the call, such as the person with whom you spoke, the date and time of the call, and what was discussed. If you have subsequent calls, log them in the same place so that you can reconstruct the chain of events.
What Did You Agree To?
You will receive the details of your forbearance in the mail after selecting the option. READ IT! Make sure that you know the who, what, where, when and how of the handling of your loan during the process and, more importantly, after the forbearance. Successfully navigating a plan in this time of crisis depends on knowing what mortgage forbearance expects of you by the bank. And therefore, doing it. You should not look at this as a vacation from your mortgage, but rather an opportunity to gain stability which takes work. If you neglect this, you may find that you missed a key date or do not have the right documents for the post-mortgage forbearance plan.
Build Your File for A Mortgage Forbearance Plan.
You can expect to need to show your financial situation when working out your post-mortgage forbearance plan. This will involve a review of your income and assets if you want something different than their standard plan. Currently, most servicers are communicating as a 6 month pay off period where the sum your deferred payments are distributed over a 6-month period and added to the regular payments. Let be clear that they are not simply tacking it onto the end of the loan and that should not be your assumption. The extension of the term would fall under a modification and to qualify you will be required to show a need. Therefore documentation for your income and assets from before and after the forbearance are crucial. You may only have a week or two to sort this out, so set yourself up for success.
Mark Key Dates on Your Calendar.
You should expect to need to have a discussion with your lender a few weeks before the first post-forbearance. Do NOT wait for them to contact you. They may, which would be great, but if they are overwhelmed, you may not get a timely call. You need time to plan for the next payment. If you must pursue a modification, you need time work through the options. A week may not be enough time. Make sure that you are budgeting for this.
Get Help For Your Post-Mortgage Forbearance Plan.
If you are over your head with this process and the potential options, get help. If you have the means to hire a professional to evaluate your situation and to help you work out a strategy, it is money well spent. The few hundred dollars for their time and expertise will pay dividends. Additionally, they may be able to assist you on a call with your bank to make sure that you see all the options and you select the solution best fits our needs. They can cut through the overwhelming aspects of the situation to help your plan and execute. If you already have a financial advisor or a CPA willing to give you some advice, they may be able to help you. There may even be free resources offered by local agencies or non-profits to help
Forbearance is a great tool, but the degree of misinformation currently swirling the internet is potentially putting many homeowners in peril. The decisions that you make around forbearance can be as important as the choices that you made when you bought the home. This is not a time to wing it. You need to educate yourself and actively manage the process. Without an informed and well thought out strategy, you could find deferred payments lead to delayed ruin.