Can Mortgage Forbearance Hurt Your Credit?

Posted on November 9, 2020November 9, 2020 by Jonathan Smith

Can Mortgage Forbearance Hurt Your Credit? and why

As we all know, the world is currently experiencing a financial downturn due to the ongoing pandemic, which has directly affected millions of jobs. As such, a lot of homeowners are bothered concerning their mortgage payments.

There have been some incentives by mortgage providers to soften the impact of payments for a period of time. This indeed was created by the Government to enable mortgage forbearance. So what then is mortgage forbearance?

What is Mortgage Forbearance?

Basically, forbearance is when a mortgage lender grants you some time or lets you pay up your mortgage at a lower rate. This method isn’t meant to scrap your payments as you would definitely be paying the reduced or paused payment back.

A lot of times, people mistake forbearance as a form of forgiveness, but this is entirely false. The bad thing about it is that even though you are let off from payments temporarily, the accumulated bill, which you owe may come in at once.

For better explanation, take for example your lender grants you six months of not paying up your mortgage. Once you reach your forbearance period, the accumulated six months, which wasn’t paid may appear in just one month.

Now, the forbearance isn’t intended for everyone. If you feel the need to exercise forbearance, you simply have to make it known to your mortgage servicer.

Can I enter a forbearance agreement?

The choice of entering a forbearance agreement is entirely up to you. Ideally, it would be unwise to enter into a forbearance agreement knowing full well that your household finances permits you to continue paying up your mortgage. If you follow up with payments without going through on the forbearance agreement, you would be eliminating the additional interest accrued.

Why mortgage forbearance hurts your credit

You should note that mortgage forbearance can have a negative impact on your credit. Most especially when you have agreed to the terms and conditions of making payments. Should you default either in skipping or making partial loan payments, then you would fall into a state of delinquency.

Delinquency oftentimes can have a major impact on your credit score, especially the fact that they are recorded on your credit report.

With the ongoing covid-19, which is indeed a special circumstance, mortgage payments, missed can be considered as technical delinquencies.

For this reason, mortgage lenders have the right to report such cases to the credit bureaus, but don’t necessarily have to. In order to prepare better, it is important to let your lender give you a proper insight in regards to their policy, so as to be better prepared for any outcome.

In addition, credit card forbearance can be damaging to your credit score in an indirect manner. Also, should you fail in making regular payments, especially when your card issuer has extended forbearance, the report you will likely get can hurt your credit score.

In conclusion, while it is important to get a mortgage forbearance, you should be fully ready to resume payments at the agreed time. You necessarily don’t want a closure of your account to be made known in your credit report.

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More Advice for Homeowners:

Can I Claim Forbearance 4 Months Into COVID-19?

Posted on August 1, 2020July 27, 2020 by Jonathan Smith

Can I Claim Forbearance 4 Months Into COVID-19?

The whole world is facing a pandemic that is not just making life different for all of us but it is equally causing major financial problems for some individuals. Individuals and countries are facing financial hardship in this coronavirus crisis. Forbearance is when your lender or mortgage servicer allows you to temporarily pay your mortgage at a lower payment or pause paying your payment. You can be able to make the paused payment later.

During this period, the lender or servicer won’t enforce a foreclosure. The terms of a forbearance payment differ from lender to lender. If an unplanned hardship makes you fall behind on your payment of a mortgage, an agreement based on forbearance might be compassionate enough to allow you to hold off the payment until your situation gets better. The lender can also extend the time of the payment if you haven’t resolved your financial issue at the estimated time of the forbearance payment.

It is no fault of yours that the coronavirus is affecting you financially and your servicer or lender understands that and would also give you more time prior to what’s on the mortgage payment agreement. The thing is that putting off the mortgage payment and claiming forbearance might currently not be the best option right now, as it might pose to be a problem for you in the near future.

The lender or servicer might ask that you pay off all the debt at once and this would be draining to your pocket. In order to still be able to claim forbearance 4 months into COVID-19, you would have to show proof to your bank or lender to show that you are still financially unstable. You can also opt into the CARES Act that was signed in on March 27. If you can’t make payments, it’s best to call your lender also but at this time reaching your lenses might be hard due to financial overload. The CARES act lets you still pause your mortgage payment six months into the signed agreement. Another six months can be added to your already paused months if you ask for it. As long as you keep reaching out to your lender, you can still claim forbearance.

For legal advice and consultation, as well as information regarding mortgage modification or mortgage mediation services. Please give us a call for a free consultation to discuss your specific financial challenges during this difficult time. You can reach us at 425-452-9797

Should I Hire a Lawyer to Help with Mortgage Mediation

Posted on July 22, 2020July 24, 2020 by Jonathan Smith

Foreclosure Defense Help with a Mortgage Mediation Attorney

Do you need a lawyer to help with mortgage mediation? This is a common question we get nearly every week and if you’re struggling to pay your mortgage based on job loss or some other economical setback, you might consider applying for a loan modification. You’ll need to decide if it’s worth paying for an attorney to help you with this process. You can apply for a mortgage modification on your own but many lenders may not even discuss this with you without the help of an attorney. Many lenders or banks, whoever has your mortgage, may have their own rules.

A loan modification is a permanent restructuring of your mortgage where your lender can change the terms so that it’s more affordable. They may be able to reduce the interest rate, convert a variable or adjustable interest rate to a fixed one, forbear some of the principal balance or extend the term of the loan. For instance, if you need to take three months off, they may be able to attack those three months onto the end of the mortgage.

It’s also important to know that if Fannie Mae or Freddie Mac is the one that owns your loan you might qualify for a flex modification which is a special loan program.

Typically, you’ll need to submit an application to your lender along with certain documents like pay stubs, bank statements, and proof that your income has decreased. It’s also important to contact your lender and ask them about their rulings when it comes to mortgage modification and if there needs to be a mediator.

A mortgage modification attorney can obviously explain all of the details behind this type of modification. Depending on your individual circumstances, a lawyer may recommend pursuing a modification, fighting the foreclosure, or putting the property up for sale in a short sale or deed in lieu of foreclosure. These are different options that a lawyer can definitely explain.

Mortgage modification paperwork can also be extensive. A lender can help you fill out the application, explain what documentation you need to submit with the application, and how to explain your financial hardship.

Because we are in Washington state, we have the Washington Foreclosure Fairness Act. This is specifically for Washington state and provides homeowners with an alternative to the frustrating and endless mortgage modification process. If you have a national lender they may not understand this process and may quickly disregard so having an attorney that understands the process, your rights, and how Washington homeowners are different than the rest of the country, really makes a lot of sense.

An attorney will also help you if your loan servicer violates federal or state loss mitigation laws. If they are forcing you to foreclose before 120 days after you’ve default on the loan, you need a lawyer in your court that can help enforce your rights. It’s extremely difficult to get your home back after a completed foreclosure so having an attorney on your side gives you a better chance of getting the results you want.

Give us a call today to learn more about loan modification and if you need a mortgage mediator. We’d be happy to discuss issues over the phone and move forward if necessary.

More: Will a loan modification lower our payments?

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Foreclosure Defense and Mortgage Mediation in Bellevue, Seattle and Washington State

In the following video that aired on King 5 New Day show Attorney Jonathan Smith talks about Mortgage Mediation and Foreclosure Defense for Washington State homeowners facing foreclosure on their Northwest home in Bellevue, Seattle, Federal Way, Redmond, Kirkland, Issaquah, Sammamish or Western Washington.

Is Mortgage Forbearance a Good Idea?

Posted on June 1, 2020June 1, 2020 by admin

Because of all the unemployment right now an estimated 4.1 million Americans have explored forbearance for their mortgage. Many experts perceive more homeowners will seek this protection unless the pandemic and current issues start to normalize. So what is forbearance?

Forbearance is the act of “pausing” your mortgage payments.

This is a basic economic rescue package for the economy and for homeowners. It acts as a cushion or breather for homeowners to get back on their feet. But is a mortgage forbearance a good idea? Here’s what you should know about mortgage forbearance.

You need to know which company services your loan and which company owns it, which may be different. The servicer is the organization you make your payment to and get your statements from. You can look up your mortgage servicer by searching the Mortgage Electronic Registration Systems website or simply look on your statements. Who owns the loan pays a role in what relief options are available to you.

70% of all mortgages are federally backed, which includes loans such as USDA, VA, and FHA. The remainder has mortgages held by private investors or banks.

The forbearance is not a mortgage modification or mediation but allows homeowners to suspend their mortgage payments for a certain period of time. The payments are not forgiven and they must be repaid later but each servicer has different options for their borrowers. They may pause the payments altogether or offer a reduced payment during this time instead. People who have federally backed mortgages that may be facing financial hardship due to the pandemic are typically given the right to forbearance for up to one year. Borrowers can request a 180-day forbearance that can be renewed and many borrowers are doing just that or at least going the 90 days with the option of extending it if necessary.

There are no additional fees, interest, or penalties that is tacked onto the account, which makes it a great option for many homeowners. Those with privately-held loans, however, don’t have the same options. They may have different relief and repayment options so it’s important to go directly to your servicer or owner or both if necessary.

It’s important to understand who is responsible for payments that might typically go into an escrow account such as homeowner’s insurance and property taxes, often included in the mortgage payment. If they are not covered by the servicer, the homeowner should continue those payments if possible.

Homeowners with federally backed loans don’t have to pay back the missed payments all at once but can be spread out over time, tacked them on to the end of the loan, or make a lump sum payment at the end of their mortgage. Borrowers that go into forbearance and return to making normal monthly mortgage payments can opt to repay those missed payments when the home is sold or refinanced.

Homeowners with privately-held loans must negotiate the best available option with their servicer, which may include extended payments or repayments over time. Make sure you understand the logistics and the rules around forbearance so that you’re not stuck with a balloon payment that you can’t afford.

Forbearance may hurt your credit score, however, the credit of homeowners who sought protection because of the pandemic is not affected. This is definitely a better option than simply not paying altogether. It comes down to communication and negotiation. Simply not paying could lead to foreclosure and severe damage to your credits.

More: What to Do if Foreclosure is Looming

Feel free to contact our office at any time for more answers to your forbearance questions, mortgage modification, or through a counselor with the Department of Housing and Urban Development. Most of these counselors are free of charge and you can always file a complaint about your servicer should they not offer any type of options.

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More Resources

Can You Negotiate Closing Costs?

How Much Does it Cost to Sell Your House?

20 Tips for Getting a Job During a Pandemic

Is Forbearance an option? [Source]

Mortgage Forbearance | How It Works Under Cares Act

Posted on April 6, 2020June 19, 2020 by admin

How Does Mortgage Forbearance work under the United States Treasury Cares Act?

Being Licensed Washington State Attorneys practicing bankruptcy and mortgage mediation law in Bellevue and Seattle, WA. we often get asked about how mortgage forbearance works under the United States Treasury Cares Act. In a Media Release on April 3rd, 2020 the CFPB or
Consumer Financial Protection Bureau released a video on How the mortgage forbearance works under the cares act.

Due to the Covid-19 Outbreak, many mortgage lenders are offering Forbearance assistance. Forbearance means your mortgage lender or bank may be willing to pause or reduce mortgage payments for a limited period of time. It does not eliminate your payment or erase what you owe on your mortgage. With a mortgage forbearance missed or reduced payments must be repaid at a future date.

It is recommended that if you are able to make or keep up with your home mortgage payments, do so. A forbearance only delays the payments to a future time when you’ll have to make them up on top of your normal mortgage payments.

Here is the video regarding How Mortgage Forbearance Works Under The Cares Act that was released by the Consumer Financial Protection Bureau or CFPB.

For information or questions regarding legal assistance for your home mortgage, mortgage mediation, mortgage modification or bankruptcy in Washington State including King, Snohomish and Pierce counties and the cities of Bellevue, Seattle, Everett, Tacoma, Olympia, and Western Washington:

If you have any legal questions regarding mortgage forbearance with your mortgage lender or bank, please give us a call. We may have some insight into different legal options for you besides forbearance including mortgage mediation or possibly even bankruptcy. When we have additional information regarding your unique financial situation then we can discuss your legal options.

Contact Advantage Legal Group in Bellevue at 425-452-9797

Homeowner Relief from COVID-19

Posted on March 23, 2020March 23, 2020 by admin

While some of us still might be getting a paycheck others of us may not and with your mortgage payment looming that can be extremely stressful. With the outbreak of coronavirus, homeowners may find themselves in challenging situations unable to make their mortgage payments. 7 out of 10 Americans live paycheck to paycheck and have less than $1000 in the bank. This can bring on stressful times for those of us that still need to make our mortgage payment. So what kind of homeowner relief from COVID-19 is available?

According to Fannie Mae, if Fannie Mae owns your loan, their Disaster Response Network can help navigate the mortgage relief process and offer other solutions to financial challenges. If you need mortgage help, Fannie Mae is available.

If the coronavirus has caused you to lose your job or income there are options. Homeowners may be eligible for forbearance plans to reduce or suspend their mortgage payments for up to 12 months.

Homeowners will not incur late fees during this time.

The credit bureau reporting of past-due payments of borrowers that are currently in a forbearance plan is suspended as well.

After the forbearance, a servicer must work with the borrower/homeowner on a permanent workout option to help maintain or reduce monthly payment amounts as necessary. This might include a loan modification.

Foreclosure sales and evictions of borrowers are suspended for 60 days.

While we don’t think that this outbreak and quarantine will last for 12 months, it is important to act quickly. If you have a Fannie Mae loan and are unable to make your mortgage payments, you can contact their Disaster Response Network for assistance. Their HUD-approved housing counselor can assist you in your needs and come up with a personalized action plan.

If your mortgages to Freddie Mac, similar forbearance assistance may also be available.

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Because new mortgage rules with the coronavirus can change daily, it’s crucial that homeowners communicate with their lender about the latest options available to them. What might not have been available last week could be available today. The important thing is to keep you in your home, prevent or avoid foreclosure, and develop a plan for the next year ahead.

For more information on loan modification, questions on bankruptcy, and mortgage mediation, contact our office at any time.

Should I Hire a Lawyer for a Mortgage Mediation or Foreclosure?

Posted on February 26, 2020February 27, 2020 by Jonathan Smith

Should I Hire a Lawyer for a Mortgage Mediation or Foreclosure? – If your lender has failed to approve previous effort to modify your loan, often mediation is the best way to go. What is mediation? Foreclosure mediation is a meeting where a homeowner and mortgage lender negotiate potential modifications or other alternatives before an impartial Judge in an attempt to reach an agreement. And this kind of mediation requires the expertise of a lawyer.

Why hire a lawyer? The most common question asked when someone is facing foreclosure is, “What will give me the best chance to avoid this?” Although circumstances involved always vary greatly, the answer ALWAYS remains the same. And that answer is this, ” to fully and most completely use all your rights and remedies including foreclosure defense, loan modification, mortgage mediation, and bankruptcy, you MUST be represented by a foreclosure lawyer…an EXPERT foreclosure lawyer.”

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You need a lawyer with TONS of experience and you need one NOW. So, be sure to ask your potential representation how long they’ve been representing clients like you, how long their practice has been devoted to foreclosure prevention and then review evaluations of recent clients. Remember, get to work on this immediately as delay, indecision and denial are the enemies of foreclosure prevention.

Beware of scams and make sure your lawyer is an expert. Anyone who generally guarantees they’ll save your home is either a scam artist or ignorant or both. Additionally, the person at the bank may be a brand new hire who knows nothing or someone who actually knows what they’re talking about. Either way, the next time you call, you may get the new hire. You want an expert, the same expert, and throughout the whole process.

An expert can help you understand the debt and tax consequences of a short sale, protect you from pitfalls and scams, assure you that, should foreclosure happen, you have the right to stay in your home for as long as your rights and remedies allow and enable you to plan where you’ll live next without fear of the sheriff showing up and ordering you to leave. An expert lawyer can also, in most cases, help you to be debt-free when you leave should foreclosure be inevitable in your case. And of course, an expert lawyer can help you come to an agreement with your lender that avoids foreclosure altogether.

Yes, these kinds of lawyers can be expensive but hiring an expert almost always benefits you not only financially but emotionally. The benefit of avoiding the loss of your home is obvious. But should you lose your home, remember, as mentioned before, there are pitfalls and scams to avoid and knowledge to be learned about debt and taxes that come with certain mediation agreements.

To contact an expert representative today, visit Advantage Legal Group.

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Will a Loan Modification Lower Our Payments?

Posted on December 9, 2019July 24, 2020 by admin

Will a Loan Modification Lower Our Payments?

If you’re looking to alter your mortgage payment or you need some form of a loan modification, you’re probably wondering what it is, how it can help, and what this means for your credit and your finances moving forward. One of the common questions I get is will a loan modification lower your payments?

Loan modification

A loan modification is a modification or a change to the original terms of your mortgage. If you’ve had a financial hardship or if you have a high risk of losing your home based on medical bills, job loss, or financial change, your lender may allow you to modify your existing mortgage. The goal is to reduce the monthly payment for a time or permanently in order to keep you in the home until things get better.

There are several different directions for loan modifications.

Principal reduction – This is where your lender will eliminate a portion of the debt allowing you to repay less than you originally borrowed. Your lender will recalculate monthly payments based on a decreased balance. Most lenders are very reluctant to do this so you’re likely to have them alter other features of the loan instead of lowering your principal amount.

Lower interest rate – Your lender may reduce your current interest rate. This can also reduce your monthly mortgage payments and save you money over time. Sometimes these rates are temporary or they can be negotiated to be permanent for the life of the loan or Intel the borrower refinances or sells the property.

Extended terms – This is where your lender will extend how many years you have to pay the loan back. This will lower your monthly interest rate but it will be more costly over time since you be paying more in interest. This option is also referred to as a re-amortization.

Fixed-rate – Your lender may switch you from an adjustable-rate mortgage to a fixed-rate loan in order to keep you in the home and keep the monthly payments the same rather than going up or down based on the interest rates.

Postpone payments – Your lender may allow you to skip a few payments, which is a good temporary solution if you have a job change, job loss, or you have medical expenses that need to be paid first.

What happens if your lender refuses to talk to you about a loan modification? Contact our office today. We handle a lot of different cases with mortgage modification and loan modifications to keep you in your home and keep your payments low.