July 13, 2020
Orion’s brokers are often asked by clients about everybody’s “favorite” topic: forbearance. Our brokers know that it allows borrowers to suspend mortgage payments for a period of time if they are experiencing a hardship related to COVID-19. But your clients may not. Please remind them that eventually those missed payments need to be repaid, likely via a payment deferral where they’re set aside and paid off via refinance or home sale. The program includes loans backed by Fannie Mae and Freddie Mac, along with FHA loans, USDA loans, and VA loans. You can help your clients by telling them what kind of loan they have.
You can also inform them that there is no documentation required for mortgage forbearance. While a borrower must attest to having a COVID-19-related hardship in order to qualify for mortgage forbearance, no other documentation is required. That means no submission of bank statements, paystubs, or a letter of explanation from a (former) employer. It is important, however, to know that once the forbearance period ends, borrowers may be required to provide income documentation if a loan modification is required to repay the missed payments.
Additionally, servicers have no real say in the matter of if a borrower should be granted forbearance or not. Servicers are permitted to “work with the borrower to better understand the borrower’s situation” but must be careful not to mislead or dissuade them from requesting forbearance. Any information obtained from the borrower during this discovery process “has no bearing on the servicer’s provision of a CARES Act forbearance.” A servicer also can’t dissuade a borrower from requesting forbearance by offering limited repayment options (like a lump sum payment) or making it look less favorable. Keeping borrowers informed of items like this is a great way for Orion’s brokers to add value.
Finally, your client can request forbearance even if their loan is already delinquent. While the CARES Act forbearance plan was designed during the COVID-19 outbreak, it also applies to those who were delinquent prior. Similarly, the mortgage servicer is required to report your client’s account as current if the mortgage was current at the time of the forbearance request. If the mortgage was delinquent before the COVID-19 emergency declaration, it must maintain the same delinquency status during the forbearance, but if your client brings their account current during the forbearance period, the servicer must report the loan as current.
Fortunately toward the end of June and now halfway through July the forbearance statistics have been improving, which is a good thing for everyone.