Mortgage Payment PSA
There is a lot of confusion around the government’s plans to help homeowners. The guidelines are still developing…here is a start for anyone you know facing hardship and concerned about their mortgage payment:
1. Make your April payment — you have until the 15th before a late charge. You must make your payment or at 30 days it will dramatically impact your credit and you will still owe the payment going into the next month — which means you will owe 2 payments or get another mortgage payment late on your credit. Late fees will continue to add up.
2. Call your servicer to discuss options — the #800 on your mortgage statement. The earlier in the day the better because call volumes are high. If you are set up on their website, check there are Covid-19 links for mortgage hardship. Keep in mind Forbearance IS NOT forgiveness…. here is some quick math:
Example couple Tom and his wife Susan have a mortgage. Their payment is $2,000 a month.
Tom loses his job (or gets furloughed, or paycheck frozen, or whatever term where income is interrupted) and he calls the mortgage servicer, and asks for forbearance.
The servicer allows him gets 6 months “off” from paying.
Seven months later, Tom is finally back to work, and hasn’t been able to save any money during the forbearance as he was just trying to survive and pay his other bills.
Forbearance is lifted and servicer says, “That will be $12,000 + $2,000, which is now due. Please pay us $14,000.”
Tom and Susan cringe. “We don’t have $14k, why do we owe so much??”
The Servicer explains : “That’s the 6 months you skipped with forbearance plus the current month.”
Tom: “We can’t do that, can we work something out?”
Servicer: “Sure, we will spread out the $14,000 over 12 months.”
Tom: “What will that look like?”
Servicer: That will be $3,166 a month for the next 12 months.”
Tom: “OMG!!! I can’t afford that.”
Tom: “Can we refinance?”
Servicer: “No because your loan is in forbearance.”
Tom: “What can we do?”
This is forbearance simplified. Forbearance is not forgiveness. This message needs to be put out there, because the mortgage industry is still getting a lot of questions and there is a lot of confusion out there — especially from the media. ￼￼Please understand the seriousness of this, and if you (or friends) still have questions please call. We will help advise you.
3. If this is a last resort, ask your servicer — “What is this going to mean for me 90 days or 6 months down the road” for any forbearance program that they discuss with you.
4. Make your mortgage payment until you have something set up with the servicer and understand how it will affect you down the road, otherwise #1.