Forbearance The real truth you should know
Forbearance The real truth you should know
I have been getting several calls on Forbearance as to what it means and what are the consequences, if you decide to do it. Please do not listen the Media that you don’t have to make your mortgage payments for the next 3 months or in some cases 12 months. They are not reporting with 100% accuracy.
If you still have your job, MAKE your payment. If you lost your job and have money in the bank, MAKE your payment. If you lost your job and can’t find a way to make your payment, then and ONLY then you should contact your mortgage servicer about your forbearance options, but make sure you carefully review the terms of the agreement. Some forbearance agreements require FULL, immediate repayment at the end of the forbearance period. Which means if you don’t make 3 payments you will owe 4 payment in the 4th month and if you skip 12 payments then you will owe 13 payments all at one time. Others may tack it on to the back end of loan, but that could be reported to creditors in some negative way. Keep in mind this has all happened so quickly and all the details have not been worked out. During the 2008 financial crisis there were meetings for days to worked out a plan to avoid exactly what we are going through right now. But keep in mind that there was much more time to plan that out then what we have now. Unfortunately We won’t know how these skipped payment will be viewed by the credit bureaus down the road. There is just too much happening at one time. Just think about what it is like dealing with the credit bureaus now and you think they are going to be able to handle making manual adjustments to 10M or 20M+ peoples credit reports? That could take many years of fighting with them and leaving you with bad credit while you try to get it all worked out. Unfortunately there is no free ride. This is a relief act for people that truly need it, and should be used as such.
Also, I can’t stress enough that you must contact your servicer to find out all the exact details and about how they will handle a forbearance, if you you find that this is the absolute last option for you. You can’t just stop making your mortgage payment!
If enough people that can pay their mortgage DON’T pay, we will be facing a major housing crisis and the free money/loan you “think” you are getting will be felt when you start loosing equity in your home. That will cause an even deeper impact to our economy and prevent the economy from bouncing back quickly. Keep in mind that most mortgage are securitized in a pool of Mortgage Back Securities. These MBS’s are in all of your 401k plans, so when you stop making your payment and the servicer has to make that payment for you and/or that loan has to be modified then that MBS pool of mortgages looses money and decreases in value and guess what so does your 401k. So you could be loosing money in 2 different ways which is why there is so much volatility right now in the MBS market and most servicing values have been cut in half or some cases worthless. Think about what will need to happen to keep those servicing companies in business? Yep, you guessed it, more government stimulus or they will go under. Guess who will be paying for that, you guessed it again, your personal tax dollars. To even make this worse they are receiving margin calls on their current locked loan pipelines and having to write checks to their broker dealers to cover your locked loan, if you are currently refinancing or buying a home. This is because when you lock your loan the lender hedges it, which mean they short that MBS, so if that MBS price goes up, which it has happened due to the FED buying MBS, then the lender has to write a check to cover your locked loan until it closes and in some cases those margin calls have been in the $100M range.
All actions have consequences, and the unintended consequences of telling people that the can not pay their mortgage “without” having to prove a hardship is a HUGE mistake that will cripple the mortgage servicers. This will ultimately cause another housing market crisis and property values will crashes and home prices will decline!
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Christian Penner, Branch Manager Mortgage Broker West Palm Beach talks about Real Estate West Palm Beach. He also serves other Local Areas and provides home Mortgage Solutions for Palm Beach Gardens, Jupiter, Boca Raton, Wellington and Tequesta. Christian Penner Mortgage Broker Jupiter has the lowest mortgage rates and the best home mortgage programs like; Jumbo loans, FHA Home Loans, VA Home Loans, Reverse Mortgage Home Loans, Freddie Mac Home Loans, Fannie Mae Home Loans and HARP Mortgage Loans. Christian Penner Mortgage Broker Palm Beach Gardens has Served the area for over 18 years with his Home Loan Lending Needs and Works with The Christian Penner Mortgage Team. Ask Me About A Mortgage, Palm Beach Mortgage Lender, West Palm Beach Mortgage Lender, Palm Beach Gardens Mortgage Lender.
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