Forbearance is NOT Forgiveness

May 28, 2020

Karan Kaul, a research associate at the Urban Institute, said,

“You still owe the money that you were paying, it’s just that there’s a temporary pause on making your monthly payments." 

The $2.2 Trillion CARES Act Stimulus Package introduced in late March, can and will help many Americans. When it comes to Real Estate, we caution you to think again before agreeing to forbearance. Knowing the facts will help guide you to the best decision for you and your family. With Reopen Nevada's Phase 1 beginning mid last month, many families are still being affected by financial difficulties. 

A statement from Mortgage Bankers Association noted that between March 2 - March 16, requests for forbearance were up 1,270%, and after that between March 16 - March 30, requests grew by 1,896%. 

Understanding what forbearance is from the borrower's standpoint: For example, say you have a $2,000 a month mortgage, and you have received 180-Days, all three skipped payments, and the 4th payment (the regular monthly payment) will be due at the same time. So a total of $8,000 is expected to be paid once the forbearance has ended.

What you NEED to know

  • It's not automatically given. You must call and agree to the terms of the forbearance. With many inquiries, call centers are overwhelmed by inbound calls. 
  • 12 Month hold on all new mortgages or refinances. Once the borrower has agreed to forbearance, even under the CARES Act, once the borrower is 60 days late, this triggers ineligibility to buy a new home or refinance until 12-month consecutive on-time payments have been made. 
  • Your credit is not affected, with a negative mark. The forbearance will be a record on your credit report. Once the forbearance has ended, if any new agreed-upon payments are not made, those will negatively affect your credit as would a regular skipped payment. 
  • Your loan must be federally backed. 
  • 180-day forbearance is granted once agreed upon, with additional 180-day eligibility if you are still facing financial difficulties.