Martha’s Vineyard – Forbearance & Refinancing during Covid19

Jen Hawkins O'Hanlon, REALTOR®


– I’m Jen O’Hanlon with Compass Martha's Vineyard and I am here with Michelle Oteri of Allied Mortgage Group. And if you are like many people across the country, you could be worried about how you’re gonna pay your mortgage, if it’s the right time to refinance right now, And so I thought Michelle and I could jump on here and try and answer some questions for everyone. So here we go, I guess Michelle one of the well, forbearance is this word that everybody’s hearing about. But I’ve also heard deferment and loan modification. So I’m just I’m wondering if you can explain what those terms mean and then go from there.

– Sure, so a forbearance is a temporary suspension of your payments, so for example, if you’re April 1st, you’re gonna say your payments are suspended. Let’s just for easy numbers, say your mortgage payment is $2,000 a month. So April 1st you don’t have to pay it, May 1st, June 1st you don’t have to pay it. So that’s $6,000, come July 1st you owe $8,000. So it’s literally just a suspension of payments, those payments are due at the end of the forbearance period.

– Okay.

– That may help short term, but it may cause financial challenges in the future because who can really do that after not working for three months, turn around and have all those mortgage payments.

– Right.

– To be paid. So you have to, and you have to be approved for it. You need to call your lender, your servicer it’s not just, oh, I’m not gonna make my payments during this time ’cause my neighbor told me they’re not making theirs. You have to call your servicer, everybody’s dealing with them differently.

– Okay, and then so what’s the difference? A loan modification is quite different than that, right?

– Yes, a loan modification, again, you have to go through your servicer, but that’s usually when they are gonna change your terms. They’re gonna, let’s say you have a high interest rate, they might change your rate from 6% to 4%. They might give you a 40 year term versus a 30 year term, but that’s a process, that’s a couple of months–

– Have you heard of anybody offering, any banks offering though that? I know it happened during the recession, you know, back around 2008, in that timeframe people were having loan modifications, but I haven’t heard of that actually happening right now.

– It’s too soon at this point, but I think that most people are jumping more to the forbearance, knowing that they’re gonna go back to work where a loan modification, you know, that’s kind of like, I lost my job, I don’t have anything, you know, going on. I need to make this mortgage work, so–

– Sorry, what’s the deferment? How does that different than the forbearance?

– So that’s just a delaying of your payments for a defined period of time as well, so that may put it on the end of your loan. It may be like a forbearance where it’s a set amount of time and then you say, now I owe $8,000 well, now let’s go into a repayment terms. And maybe it’s just kind of negotiating as you go along. The issue is there’s no, steadfast way of knowing exactly. You have to talk to your servicer. Everybody’s doing it differently. I’ve talked to numerous different customers that some say they don’t have to pay their taxes and insurance, some say they absolutely do have to, Some say it’ll get tacked on. So you have to ask your servicer exactly how it’s gonna be done. Is it going to affect my credit? Some have said, oh, I never asked that question, some have said, I asked the question, they absolutely said no. But what happens when, in the instance I gave you before July 1st they have $8,000 due. What happens if they don’t have the $8,000? Will it then affect their credit? So the consumer really has to ask these questions. They have to be very knowledgeable to their servicer as exactly what’s going on.

– Okay, so we may get back around that subject since it’s a big one, but let me ask a few other things. What about refinancing with the Federal Reserve announcing 0% rate and then sort of trying to understand that that doesn’t mean a mortgage rate that that’s extremely low or lower than what the lows have been. So what is your experience with what’s going on there?

– So, yeah, the Federal Reserve, that rate does not impact mortgage rates, although, ’cause the mortgage rates are set by the US bond market and although they’re kinda going hand in hand, rates are going down because essentially we’re getting into a recession, like people aren’t working, we are going to have, you know.

– Some version.

– Yeah, so rates are most likely gonna remain low throughout the year because they have to. I mean there’s really not any way around that. But with that being said, I can’t predict the rates, I can’t say, hey, wait three months and the rates are gonna be great, ’cause right now they’re pretty great to have 30 year fixed rates in the threes. You know, that’s amazing. So if you’re in the fours and it’s worth it to refinance now, it’s probably worth it to get it done and over with. But then you come into the problem, you need to be working. Can you, are you working from home? Are you still getting paid? So a lot of loans are just getting put on hold right now until the people can go back to work.

– Right. So yeah, I was actually thinking that you could refinance if you had equity in your home and you were worried about paying for things, but that isn’t gonna work if you are unemployed.

– Correct.

– And then I know you had mentioned that you received a call from somebody who was planning on making a purchase either this year or next year, and they’re collecting unemployment and they were actually worried that could affect their ability to make a purchase.

– Yes, they said someone told them like, don’t listen to your neighbor, don’t listen to the coffee shop people, call a professional, call you, call me. But in this instance with someone collecting unemployment, it absolutely will not affect you down the road. ‘Cause this is a worldwide problem. Whoever she was talking to that collected unemployment and it might’ve messed up their mortgage, they probably had a spotty job history, they probably had six months of employment, eight months off, and then maybe a small job here and there, you know, that’s not stable employment. But I know this person, they’ve had a stable job for five years, they’re getting laid off. There’s not much they can do about it. They’re gonna go back, it’s a solid company.

– Right.

– So collecting unemployment for a short period of time is not gonna affect her getting a mortgage in the next year.

– Okay, that’s good to know. Let’s see what else. I know that we talked about an article that you thought was really helpful and I’m gonna post that to my business page after this. So, if people want that information just kinda goes into a lot of the details about the forbearance and what you should do, and, you know, one of the things that people have been talking about is just thinking that, oh, I can just wait because the government has sort of made some mandate to the banks that we can get this forbearance and therefore we don’t have to pay our bill, our mortgage this month. So the key is that they, you just need to call your bank–

– Well, you need to call and you still are gonna be responsible for those payments. There is not anybody that’s just getting free money. You’re gonna be responsible one way or another. You may have to prove a hardship. Some people might be calling just ’cause they want the security, but they still have their job. They want security of not making those payments. You might have to prove that hardship to your lender. So there’s, and the biggest thing is, is if you’re doing it as a security measure and you don’t realize it’s impacting your credit, and now, you know, six months down the road you have mortgage lates, not worth it, not worth it at all. If you can make the payments, if you have a savings, you wanna try and stay on top of those payments.

– Okay, so I think if people call their mortgage servicer and they are told, you know, sort of yes we can do it, but you know, they’re gonna have to make those huge payments later. They should really do anything they can, it sounds like to not take part in the forbearance.

– Yeah, I mean, again, if their servicer is very clear and says this will not affect your credit, we will make these payment terms, but a lot of the servicers are not really knowing themselves how it’s gonna work, and that’s the scary, scary part. Back in 08 when this all happened, they would say, oh no, it’s not gonna affect your credit. And it did affect people’s credit,

– Okay.

– Sorry.

– That’s okay. Pretty much, I think we’ve covered everything. I just wanted to talk about the interest rates and refinancing. So you’re saying that there may or may not be a benefit to waiting to refinance for a few months?

– It’s just hard to tell. I mean, if you’re not employed, you kinda have to wait. What I’ve been telling people is go on my website, put your information in so that when the rates do hit rock bottom and we’re ready to go. So what’s gonna happen is, everybody’s gonna get jammed up and they’re gonna…


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