Understanding that Forbearance is not Forgiveness

The Covid-19 Coronavirus has led to some challenging times for all of us. The Government has created the CARES Act to assist homeowners whose income may have been adversely impacted by the coronavirus. One of the components of the CARES Act is the possibility of mortgage forbearance. Forbearance is often misinterpreted. Many people are mistakenly thinking that forbearance equals forgiveness. It does not. This is truly intended as temporarily relief for those who need it most. Forbearance means that the payments will be suspended for a short period of time, initially up to 6 months, but will need to be caught up when the forbearance period is over. Think about when you buy something at a furniture store that offers “no payments” for 3 months. You still must pay for the furniture…the payments are just deferred. There is absolutely no financial benefit by exercising forbearance, as you will either have to pay a lump sum, modify your loan, or owe the balance when you refinance or sell your home. If you really need to exercise forbearance, you cannot just decide to stop making payments. You must notify your Mortgage Servicer and agree to the forbearance terms.

So what should you do? If you CAN pay your mortgage, then you should continue making your payments. If you CANNOT, then contact your mortgage servicer to discuss what options are available, as each mortgage servicer is different in what they offer. Understand though, that if you exercise forbearance, it could possibly prevent you from qualifying for a mortgage loan later, because you would not have a 12 month payment history. Depending on your situation, I may be able to help by eliminating your debts, lowering your payment, and giving you a cash cushion during these turbulent times. Please contact me if you'd like to discuss which options are available for you.