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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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What Documents Do I Need to Start a Mortgage Forbearance?

Posted on October 5, 2020October 5, 2020 by Jonathan Smith

What Documents Do I Need to Start a Mortgage Forbearance?

With the recent coronavirus that hit the world really hard, most people have been forced to face untold hardship. This isn’t something that was bargained for by anyone, it just happened and everyone needs to adjust to the changes in the economy. The pandemic has affected the economy so badly that most people are worried sick about where their next mortgage payment will come from. However, the good news is there is always a way out because you can talk to your lender to grant you a forbearance agreement. It is an option open to everyone who has to pay their monthly mortgage payment, this way you can avoid being penalized for late payment or the foreclosure of the mortgaged property.

What is a mortgage forbearance?

Mortgage forbearance is an agreement between you and the lender to either reduce your mortgage monthly payment or defer the payment completely for a period of time. This forbearance is mostly requested by homeowners who are financially trapped and are not able to keep up with their mortgage payment. However, forbearance does not mean you won’t pay your loan again, you will still pay the amount you were not able to pay at a later date. Due to this pandemic, lenders have given borrowers a long-term forbearance agreement so they can deal with their financial problems.

While you are trying to get a forbearance, there are some documents you will be needing to give to your lender before your forbearance can be granted.

Documents needed for a mortgage forbearance

The documents needed for a mortgage forbearance actually differ by the lenders, which means you need to find out from your lender what documents you need to tender so that your application will be granted.

Application letter: Although requirements vary, but you are most likely going to submit an application letter stating your request. This application can be either oral or written because some lenders would prefer you to call them or send an online application.

Recent mortgage statement: You will need to present your most recent mortgage statement to your lender as proof that you have been keeping up with your mortgage payments to date.

Estimated monthly expenses: An estimate of your monthly expenses will also be required by your lender before they can grant you audience and listen to your plea for a forbearance.

Explanation of your financial situation: Since a poor financial situation is a reason why you need a mortgage forbearance, you would be asked to explain how bad the situation is for you. If you are out of a job or ill or any other situation, you will need to explain to your lender and in most cases show them proof of how bad things are for you so you can be granted the mortgage forbearance.

The documents listed above are what you will need to apply for aa mortgage forbearance, however, it is advised that you start the process on time so you don’t have to miss out on any payment when your forbearance has not been approved. Things are a bit difficult in the world currently and it wouldn’t hurt if you can apply for a mortgage forbearance to ease the burden of paying a loan off you until you can find your feet again.

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How Far Behind Do I Have to Be For Mortgage Forbearance?

Posted on August 12, 2020 by Jonathan Smith

How Far Behind Do I Have to Be For Mortgage Forbearance?

Under normal circumstances, there are policies owned by all lenders, and that is what you should be working with. However, if you are finding it difficult paying you mortgages either due to lose of job or increase in costs. There is a 15-day grace period, and if you are able to meet up and make payment, you are all good but if you happen to miss your second payment, it is said that you have defaulted and you should expect a change in your mortgage servicer.

Once you have noticed that you won’t be able to meet up with your payment, it is advisable to contact your lender and discuss mortgage forbearance.

MORTGAGE FORBEARANCE

This is an official agreement between the home owner (you) and the lender, if for any reason you are unable to pay your monthly mortgage amount. Your payment requirements will be frozen by the lender for a period of time. After the agreed period elapses, you are expected to continue your normal monthly payments and you will also pay back all balance owed, including all interests gathered during your grace period. This sounds like a great deal especially to those who have lost their jobs during this Coronavirus crisis, it helps you skip some or all of your monthly mortgage payment for as much as a year. But it should be considered as your last resorts, and should be avoided if possible because while it can be a life line for a short period, it will undoubtedly lead to credit issues.

More: Is Mortgage Forbearance a Good Idea?

HOW TO WORK WITH YOUR LENDER TO GET FORBEARANCE

STEP 1: REACH OUT

Contact your lender and inform them about your present crisis financial state. Some of them have online chat options or a forbearance form you can use also. Some key information and documentation will be needed by your lender, so be prepared to provide these:
• An outline of your financial state, also the cause of the financial issues and when you think all be fixed back to normal.
• Mortgage loan or your account number
• Your monthly income before taxes
• Monthly expenses clearly itemized

Remember, that your lender wants you to keep your home and keep paying your mortgage so they will do their best to help, don’t be afraid to ask for help.

STEP 2: REQUEST

The lender must follow some steps before granting you the forbearance agreement. They might ask you to make some deductions on your monthly expenses, if they notice some things that are not needed on your list; you should be able to explain to them why those things cannot be removed from your list, you will also prove that you are making efforts to get a new paying job.

STEP 3: SUBMIT

Your lender will want to confirm your financial crisis, provide them with your unemployment verification letter with detailed information. Follow up your lender until a negotiator or loan officer is assigned to your account, which you will work with till the end of the process.

STEP 4: WAIT

After you are assigned with a negotiator, you have to wait for approval, sometimes it takes several weeks but ensure you follow up with your negotiator to show that you are serious with your request.

STEP 5: RECEIVE

Once you are approved, a letter with detailed terms of the agreement will be drafted by the negotiator, with the forbearance period time frame, amount to be paid during that period, the interest rate of the amount owed and how to repay the outstanding balance after the period.

STEP 6: SIGN AND RETURN

If you are satisfied with the terms, sign the agreement form and return to the lender. Your forbearance period has commenced after submission. After this period your payments return to normal, with an additional payment to cover your outstanding balance.

Assuming you fail to meet up with the terms of forbearance, your home will likely go into foreclosure. This is the last step before you lose ownership of your home.

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

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.