After Forbearance - Now What?
Covid-19 has impacted homeowners across the country. With job losses and income reductions, many have taken advantage of the ability to enter a forbearance program with their lenders. During the forbearance program, the agreements state that no late fees will be assessed, and the balance of missed payments will be deferred to the end of the loan. As a result, many homeowners have been able to keep their homes during this time of economic upheaval. Some of these affected may now have stabilized incomes and are ready to exit forbearance. They might be wondering if they will be penalized for this if they choose to refinance or buy a new home. Fortunately, there is good news for these homeowners. Part of the program is that the lender will not report these late payments to the credit bureaus so the borrower will not have that issue to contend with when they are ready to find a new loan. Lenders understand that this is a unique situation and that it is not representative of the way a borrower will remit payment in the long run. Additionally, some potential homebuyers may need to relocate to take advantage of new employment opportunities—requiring them to sell their homes and buy new ones. The good news is that homeowners who exit their forbearance plans can apply for a refinance or new loan after 3 consecutive, on-time mortgage payments. Covid-19 has impacted our lives in many ways. Fortunately, the lending community has taken unprecedented steps to ensure the long-term damage to individuals and housing is minimized as much as possible.