Coronavirus, Mortgage Payments and Getting a Forbearance Through the Cares Act
If your income has dropped and you can't afford to make your mortgage payment , Congress made it easier to stop making payments for a while. It's a process called forbearance. If you can afford to continue making payments, you should keep making payments. Here's why:
Forbearance has unintended consequences for homeowners.
If you have a legit financial need to skip payments, this legislation was made for you and it is a lifeline to give you the relief from making a mortgage payment if you really need it. But please be aware that things won't get back to normal right away, EVEN AFTER you're able to start making payments again.
Before you stop making your mortgage payments, be aware of how the mortgage market will treat those in forbearance when it comes time to get your next home loan. Even though there will not technically be derogatory information on your credit report (assuming no mistakes are made, or that they've been cleared up), you may not qualify for another conventional loan for months AFTER your forbearance has been brought current, and you definitely won't qualify if you are still paying back a forbearance deficiency.
This raises another critical point: how do you bring it current? What happens after you're done skipping payments? The answers to this vary based on your mortgage servicer, but one of the most common initial answers is that you're on the hook for the lump sum of payments you missed. The official answer from the FHFA is as follows: "At the end of the forbearance period, the homeowner will work with their servicer to repay all past due amounts and accrued interest. Homeowners unable to resolve past due amounts, or who need a lower mortgage payment, are evaluated for longer-term borrower assistance options such as a loan modification."
Those who have had to deal with loan modifications in the past know that it doesn't often work out as simply as it might sound. And there too, your ability to qualify for the best mortgage programs may be limited in the future.
The takeaway message is that if your income has been taken away, and you need relief from paying your mortgage, then call your current mortgage servicer and ask about a forbearance. However, if you can still make your payment, I recommend you not get a forbearance.