2 minute read
Q&A
Moving on out
Q&A ASK OUR BROKER By Peter G. Miller
Question: We hope to sell our current home during the coming year and buy in a less expensive area. We have substantial equity, but with two surprise job losses had to ask our lender for forbearance. We’re now employed again. Will lenders be open to a mortgage application from us? Answer: The Federal Housing Finance Agency (FHFA), the government regulator that oversees Fannie Mae and Freddie Mac, announced several refinancing standards in May. “Borrowers are eligible to refinance or buy a new home if they are current on their mortgage.” The term “current on their mortgage” includes those “in forbearance but continued to make their mortgage payments or reinstated their mortgage.” There is a timeframe for those in forbearance. “Borrowers are eligible to refinance or buy a new home three months after their forbearance ends.” There is also a performance requirement for borrowers in forbearance. They must “have made three consecutive payments under their repayment plan, or payment deferral option or loan modification.” “Homeowners who are in COVID-19 forbearance but continue to make their mortgage payment will not be penalized,” said FHFA Director Mark Calabria. “Today’s action allows homeowners to access record low mortgage rates and keeps the mortgage market functioning as efficiently as possible.” The FHFA approach makes sense but also raises concerns. The three-month repayment history requirement – rather than say six months or a year – is very liberal and should be welcomed by borrowers. However, not all mortgages come under the Fannie Mae/ Freddie Mac umbrella. Borrowers may face different qualification standards when they go to buy or refinance with jumbo mortgages, portfolio loans, and non-qualifying mortgages (non-QM financing). Despite the pandemic – so far, at least – many borrowers may not need forbearance. A LendingTree survey found that just 5% of those in forbearance were worried about missing a mortgage payment. Alternatively, “almost 70% said they could’ve made their payments, but just wanted a break from their normal payments.” In other words, it appears that many borrowers who might benefit from forbearance are not seeking lender help while at the same time, large numbers of borrowers with forbearance likely don’t need it. Suppose the possibility of a late or missing mortgage payment is real. In that case, forbearance is something to look into because missed mortgage payments can lead to foreclosure, the loss of a home, and even bankruptcy. However, if you’re doing okay, if you’ve hunkered down in tough times and are managing to pay the bills, then forbearance is something to avoid. It can lead to higher future mortgage costs with repayment plans and a bigger debt to the lender if unmade payments are pushed to the back of the mortgage schedule. The bottom line: If you’re now in a forbearance program, you may be able to get new mortgage financing once you have re-established your payment history. Email your real estate questions for Mr. Miller to peter@ctwfeatures.com.
