Did People Take Advantage of Forbearance? Housing Wire reported yesterday on a survey of 1,300 borrowers by Lending Tree, found that those who applied for forbearance and got approved (20% of them), ONLY 5% said they wouldn’t have been able to pay their mortgage payment. I was afraid this would happen and I predicted this 2 months ago. I know FHFA Director Mark Calabria didn’t think that borrowers would try to “game” the system; but he was wrong. When you tell people something’s “easy and free” they will do it if it benefits them. I know human nature
Buyer Demand is Increasing The Mortgage Bankers Association reported that mortgage purchase applications increased again last week for the 5th consecutive week! Purchase loan applications rose 6% last week and are now only 1.5% lower than this time last year! This is incredibly good news! And people don’t apply for a mortgage and get pre-approved just for the fun of it. These are people who are serious about buying a home.
Great News for Borrowers in Forbearance Fannie and Freddie on Tuesday announced some great news for our clients who did choose forbearance. For those borrowers who requested forbearance, but still made their monthly mortgage payments these borrowers are immediately able to close on a new conventional loan for purchase or refinance with Fannie or Freddie.
For borrowers who chose forbearance and did miss 1 or more payments, these borrowers are eligible to get a new conventional loan for purchase or refinance from Fannie or Freddie IF they have ended their forbearance period AND MADE 3 consecutive monthly payments on their mortgage. For example, they entered forbearance in April and did not make their May payment. If they end their forbearance period and make their mortgage payments on-time in June, July, and August they can close on a new conventional loan in September.
Before this change the Sellers Guides of both Fannie and Freddie required that a borrower make 12 consecutive on-time payments before they could get a new conventional loan to buy a home or to refinance a home. So, this is great news!
So, how does a borrower end forbearance? They must contact their loan servicer and choose a Loss Mitigation Solution, such as the following and ask for their forbearance period to end and then begin making their monthly mortgage payments on time-
- Lump Sum Payment Plan-In which they repay the missed payments missed now.
- Repayment Plan – A predetermined number of higher monthly payments to satisfy the delinquent principal and interest from the missed payments.
- Payment Deferral – The servicer agrees to apply and extend the missed payments to the end of the mortgage term. I expect this option will be very popular.
- Modification – The servicer agrees to amend the terms of the mortgage for a certain period of time, i.e. a lower interest rate than stated on the Note.
- Other Options – There may be other solutions not noted above.