Forbearance Does Not mean forgiveness - YouTube

- Forbearance does not mean forgiveness.

It's important for you to understand what it is

that you are signing.

Let's do some forbearance math.

Cindy and Joe have a mortgage.

It's currently at $2,000 per month.

Joe loses his job and gets laid off from work.

Joe hears all the news about forbearance

and how if you've been negatively impacted by COVID-19

that banks will have to work with you.

Excited, Joe calls the mortgage servicer

and inquires about the forbearance he is entitled to.

He's so excited because in just one phone call, for now,

he doesn't have to pay his mortgage for six months.

That is where the craziness comes in.

Now seven months later, Joe is back to work,

and of course he was not able to save any additional money

when he was out of work during the forbearance period.

The forbearance timeframe of six months is now up,

and the servicer sends Joe and Cindy their bill.

Cindy nearly falls over and dies

because the bill shows now Cindy

and Joe owe $12,000 plus $2,000,

and it's all due now on the seventh month.

So $14,000 in total are all due now, this month.

Joe is shocked and calls the servicer and asks why.

The servicer explains that the six months

of forbearance times $2,000, plus the current month

of $2,000 totaling $14,000 are all due now.

Joe says, "Well obviously, I haven't been working

"and I don't have that kind of money.

"I can't pay that.

"Is there anything I can do?

"Can we renegotiate?"

The servicer says, "Sure.

"We can spread out the $12,000 over 12 months."

Joe says "Great, thanks so much.

"How does that work?"

The servicer explains that his monthly payment

will be $3,000 per month for the next 12 months.

Joe says, "What, I don't understand, why?"

The servicer says "Well the $12,000 divided

by 12 months equals $1,000 per month,

plus your normal payment of $2,000 per month

equals $3,000 per month for the next 12 months.

Joe says, "I can't afford that."

The servicer says, "Sorry."

Joe asks, "Can I refinance?"

The servicer says "No because the loan went into forbearance

"and you don't have a satisfactory

"recent mortgage payment history

"in the eyes of Fannie Mae and Freddie Mac's

"current underwriting approval guidelines."

Joe says, "What can I do?"

Well, to sum all of this up, forbearance is not forgiveness.

You still must pay it back.

Whether it's at the end of a few months,

or at the end of the lifetime of the loan,

it will have to be paid back.

We need to make sure that we are correctly giving out

information regarding forbearance.

I've recently heard an attorney telling sellers

that they should just do forbearance,

and they will not have to pay it back

and there will be no consequences.

This is not correct.

Please make sure you understand what you're getting into.

It's very similar to that of 2008

when people were short selling and didn't realize

before they passed the Mortgage Forgiveness Debt Relief Act

that if you sold your property

you would be taxed on the difference between what you owed

and what you short sold your home for.

Just remember, there isn't such a thing as free

as of right now when it comes to forbearance.

The mortgage servicers cannot sustain this prolonged period

of fronting the money you don't pay them

during the forbearance period

and they will need to seek restitution somehow.

Unlike the mortgage crisis in 2008,

most people have a substantial amount

of equity in their home.

At some point the money owed will become due.

Mortgage Interest Rates will likely be low

for the majority of 2020.

Don't allow media headlines, or bad information

to cloud your judgment and take you down the wrong path

and disqualify you and your ability to refinance

or worse, cause you to lose your home.

Think back to the last housing crisis

and remember how dangerous it is to take advice

from people who are not qualified to provide it.

Speak to the correct people, ask the right questions,

read the fine print.

While forbearance might be the only option for some,

it should not be pursued unless absolutely necessary.

Other options may be offered by your mortgage servicer

such as deferring the entire amount due

to the back end of the loan,

but assumptions should not be made

without written clarification.

If you have any questions at all about forbearance

or anything, please reach out to myself

or any member of my team

and we'd be happy to help you in any way we can.

This is Kevin Heinbuch Team with the Kevin Heinbuch team

at WHY USA Eastern Iowa Realty.