How does mortgage forbearance work with the CARES law?

The CARES Act allows homeowners to delay mortgage payments, but is it the right thing to do? We asked experts.

DENVER, Colorado – The United States has not seen such job losses since the Great Depression. In turn, millions of people have already taken advantage of the CARES Act, which allows homeowners to delay mortgage payments.

But, many of these owners are worried about what they will owe at the end of their forbearance period.

“I was a little depressed,” said Denver resident Jill Duncan, who lost her job due to the pandemic. “I was at my old job for five and a half years. It paid off well. I liked it.

“I can miss three payments, but the bad thing is that when the forbearance is over, I have to pay all three payments, plus whatever will be due at that time. It would be several thousand dollars that I would have to pay to. both. And that’s not very useful. ”

Although forbearance on government guaranteed loans is required during these difficult times, it is up to the banks to decide how often payments can be missed and how they will recover those payments.

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Some, like Duncan, want it all of a sudden. Others will increase the cost of future mortgage payments. If you’re lucky, the loan manager will add interest-free payments at the end of the mortgage. The CARES Act prevents banks from incurring late fees or reporting missed payments to credit bureaus for currently forborne loans.

Jim Nolte is Branch Manager for Celebrity Home Loans. His best advice is to pay off your mortgage if you can, avoiding those higher payments. He says it could have an impact on future loans as well.

“This is a question that is asked and it could disqualify you if you are in a current forbearance program on a new loan,” said Nolte, who suggests considering refinancing for a potentially lower interest rate. instead of going into abstention. “You can potentially skip two months of your payment and shift all of the refinancing costs into your mortgage. “

But if you can’t avoid it, contact your loan officer and start asking questions. Before you commit, make sure you understand how long your bank allows for forbearance, what you’ll need, and when it should be paid.

One of the most important questions that many unemployed people may ask themselves is:
“What if I can’t pay when my tolerance is over?” Homeowners may be able to work with their loan officer to secure a loan modification. While banks currently cannot exclude government guaranteed mortgages, a change can relieve some stress over time.

Duncan walked patiently as she had no options left. She’s looking for a job but if that doesn’t happen, she hopes her bank will work with her.

“I’m really in the dark until it’s time to pay off this loan or tell them I can’t pay this lump sum, and I hope they are ready and able to work with me.” Duncan said. “But right now it’s a little scary because I don’t know what would be approved in the future.”

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