Are Forbearance Agreements on the Rise?
I have been talking with a seller who says that in November his mortgage is going to be a lot better; therefore being a better time for me to go into contract with the seller.
This case study is interesting mostly because it’s confusing. It’s confusing because of the weird Covid-19 mortgage relief options coming out from the servicers.
My seller says that he has received a letter from the mortgage company that on November 11th, his mortgage payments that are in arrears will be made into an additional loan on the back end of the mortgage. This is a type of forbearance option. He thinks that amount past-due will become nicely tied-up into a forbearance option, as a pseudo second mortgage, with a balloon payoff. (Disclosure: I have not read the letter that the seller has received.)
The seller further reports that he/she does not have to do anything for this to take place. In fact, the seller says that the letter instructed them to do nothing, unless they want to fight this (let’s call it a gift?).
There is one more crazier detail about the report on this letter, which says that the servicer will wipe away all the penalties, delinquent charges and additional interest. In other words, the amount currently due on his/hers Notice of Default is $267,000; but come November 12th the seller will no longer be in default and have a balance due of much less; surmised to be less than $240,000.
What is going on?
Per their website, the FHFA (Federal Housing Finance Agency) is closely monitoring the coronavirus national emergency’s effect on the housing finance market and continues to update policies and guidance to ensure its regulated entities – Fannie Mae, Freddie Mac (the Enterprises), and the Federal Home Loan Banks (FHLBanks) – are fulfilling their mission of providing market liquidity during this difficult time.
My Seller’s letter is quite different from what I find on the web; and yet that’s not surprising. After the HUGE fiasco of the last mortgage crisis, I can surmise why the mortgage servicers are not attempting to man the phones, and instead are just assuming the majority of borrowers want relief! Yay!
Yet, is this truth, or is it fiction?
So I began my research. If you look at the FHFA.gov website, it tells borrowers to
1 Call the number on your mortgage statement
2 Tell them you are experiencing financial hardship due to the pandemic
3 Ask if you are eligible for protections under the CARES Act
The CARES Act protects homeowners with federal- ly backed loans
· Fannie Mae
· Freddie Mac
4 Ask what happens when your Forbearance period ends.
a. How will you pay any paused or missed payments
b. When will you need to pay the missed payments
c. Your servicer may not be able to give you all the details upfront, but perhaps you’ll get an idea of what to expect.
5 Ask for the agreement in WRITING! Check it, to make sure it matches your verbal agreement. Sign, and make sure you have their signature on your copy.
The Final kicker per the FHFA website – is “Don’t Wait!” Forbearance is not automatic. You must request it.
I am hoping that the borrower/seller is correct on what he lieves the letter said, and that the letter was not misguiding. If you were investing in real estate in the great recession by reaching out to people whose homes were in the pre-foreclosure process, you will understand my misgivings on the servicer’s letter. Because during the years of 2010 – 2013 the letters issued by servicers were very misguiding and lead to millions of people losing their homes while they tired and tried to get through to the big banks’ call centers, send in mountains of paperwork; only to be told that the bank has no record of receiving the documents.
Looking at the HUD Affairs website updated on September 27, 2021; Specifically, FHA made the following changes, effective on 9/27/21:
· A new COVID-19 Forbearance or HECM (Home Equity Conversion Mortgage) Extension period for borrowers who may be newly affected by the pandemic: FHA is now providing up to six months of COVID-19 Forbearance for borrowers requesting an initial COVID-19 Forbearance or HECM Extension from their mortgage servicer between October 1, 2021, and the end of the COVID-19 National Emergency, and an additional six months if the COVID-19 Forbearance or HECM Extension is exhausted and expires before the end of the COVID-19 National Emergency.
An additional COVID-19 Forbearance or HECM Extension period for borrowers recently seeking assistance: FHA is now providing up to six months of additional forbearance for borrowers who requested or will request an initial COVID-19 Forbearance or HECM Extension from their mortgage servicer between July 1, 2021, and September 30, 2021, allowing these borrowers up to a maximum of 12 months of COVID-19 Forbearance or HECM Extension.
“Our top priority is to help as many individuals and families as possible to recover from the COVID-19 pandemic and keep their homes,” said Principal Deputy Assistant Secretary for Housing Lopa Kolluri. “For FHA, this means that we will continue to work through all of our channels – mortgage servicers, housing counselors, and our other federal partners – to ensure we get the positive outcomes struggling homeowners need.”
The Oregon Homeowner Stabilization Initiative (OHSI) falls short. That’s because it appears it’s too late to apply for any sort of forbearance in Oregon, because the Oregon Homeownership Stabilization Initiative (OHSI) website clearly states that OHSI’s COVID-19 mortgage relief is now closed and is not accepting any new applications.