Forbearance Repayment Options Announced
As businesses begin reopening, we are optimistic that the real estate industry will continue to ramp up into a busy Summer buying season.
Several updates have occurred over the last week in regard to Mortgage Forbearance.
When the Government announced the mortgage forbearance for borrowers with financial hardship due to the COVID-19 pandemic, there was no stated program on the repayment of missed payments once the forbearance period ended. Different servicers were issuing different options. Now, as the time approaches for some of these repayments to begin, we have more information on the repayment options available to borrowers.
Currently, there are four options available for repayment. However, borrowers need to check with their servicers to see which they are offering.
- Reinstatement. Borrowers can repay the entire amount due at the time deferral ends.
- Repayment Plan. Borrowers can enter into a monthly repayment plan until the amount owed is repaid.
- Loan Modifications. Based on their financial situation, borrowers can request a modification to their loan terms if offered and approved by the servicer.
- Payment Deferral. Earlier this month, FHFA announced payment deferral as a new repayment option. We believe this will be one of the most popular choices for borrowers. The payment deferral option allows borrowers who can return to making their regular monthly mortgage payment, to pay back their missed payments when they sell their home, refinance, or pay off the mortgage. This new forbearance repayment solution responsibly simplifies options for homeowners while providing an additional tool for mortgage servicers. Servicers will begin offering the payment deferral repayment option starting July 1, 2020.
FNMA and FHLMC have clarified the process that homeowners who have been in forbearance need to do before they can obtain new mortgage loans.
- Payback all missed payments, cancel the forbearance program, and bring their next payment current.
- If borrowers have completed their forbearance program and have established a repayment plan, they must make three payments on time to be eligible for a new mortgage.
Be Aware: Some Credit Unions are Automatically Placing Auto Loans into Forbearance
Several credit unions are offering auto payment deferrals for their clients, yet some are automatically placing auto loans into forbearance without notifying borrowers. For example, two well-established Southern California credit unions froze payments for three months on auto loans for their customers who were set -up for automatic payment deduction -- without notification. The missed payments were added to the end of the loan. This can cause delays when borrowers apply for a new loan. To resolve this, the borrower will need to make all missed payments and inform their credit union that they do not want to skip any payments.
At San Diego Funding and Great Pacific Funding, we have never stopped working for our clients. We are finding new ways help our client's secure financing - safely and successfully. Please reach out to any of our loan officers to discuss your financing needs.