PSA regarding Mortgage Forbearance, Rate Updates, and Changes in Mortgage Lending

Dear Friend & Past Client,

Normally, I will send out a mortgage lending update to my past clients, my future clients that I have been working with on pre-approvals, and local West Michigan Real Estate Agents.  However, this email is mainly for my past mortgage clients, and it is intended to be a public service announcement regarding the dangers and pitfalls of putting your mortgage in forbearance. Still, if anyone feels the information in this email will benefit someone they know, please feel free to forward it to them. 

If you are in a position where you absolutely CANNOT make a mortgage payment, car payment, credit card payment, etc., and the creditor tells you that they will not report you late over this period, please do yourself a huge favor and get that in writing!
Some mortgage lenders may agree, in writing, to not report you late, while allowing you to skip a payment(s) by adding the amount onto the balance of your mortgage. We still don’t know yet how mortgage lenders will treat those missed payments, if you are going to apply for a new mortgage within 12-24 months of forgoing those house payments.
Based on my experience from the 2008 housing bubble, I was able to see the ramifications of many people who ended up modifying their mortgage in order to lower their payments, or get caught up on their payments (or both).  Many of these homeowners were told that the modifications would not affect their credit adversely; but so often that was not the case. Even in situations where mortgage services did not report the homeowner as being late, reports were not made on the mortgage as being “modified”, preventing  thousands of homeowners from getting approved to purchase new homes after having their mortgage modified.

If it comes down to feeding your family and keeping the lights on vs. putting your mortgage in some type of forbearance program, then it becomes a no-brainer on what is the proper choice to make.  However, if you are looking to take advantage of low rates by refinancing or purchasing a new home in the next 12-24 months, you will want to reconsider taking advantage of some type of mortgage forbearance program unless it is absolutely necessary. The same may apply if you want to maintain your credit score, depending on how the modification is handled and treated. This belief is not just mine, but is shared almost unanimously throughout the mortgage lending industry.

Rate Update: Recently, the Federal Reserve has stepped in and has started buying mortgage backed securities in mass following the two most chaotic weeks in their history. As a result, mortgage rates are stabilizing and have come back down considerably from where they peaked on Friday, March 20th, 2020. In fact, rules are now within range for many people to discuss refinancing again. If your current mortgage rate is above 4.00%, or even above 3.75% but has mortgage insurance, please contact me to see if a refinance may be beneficial for you at this time, or possibly sometime in the near future if they continue to drop. I will be glad to work up a refinance loan estimate for you, combining it with a cost/benefit analysis; or I can put you on my watch list for when the market hits the target rate you are looking for. 

Furthermore, if you have been in the market for a new purchase, please make sure to freshen up your pre-approval. There have been recent changes in guidelines that may not allow you to qualify for as much home since some programs may have tightened up on the debt-to-income ratios. Likewise, some government backed mortgage programs have increased credit score requirements across the board and some lower credit score applicants may all of a sudden need to make some adjustments to improve their credit scores. 

We expect the listings to come out in droves after the quarantine is lifted. In fact, Greater Regional Alliance of Realtors (GRAR.com) has reported 127 new listings and 107 pending sales in Kent and Ottawa County between March 25th and April 4th!!  You don’t want to fall behind the competition by not obtaining a full pre-approval when your perfect home hits the market.

So, whether you are looking to drop your monthly payment, get cash out for debt consolidation purposes, or get yourself fully pre-approved, please contact me.  As always, I am here to help you.

Hang in there friends. We are all looking to be there and care for one another in every way possible. Life will go on and return to normalcy. Hopefully, that is sooner than later, and we will all have learned many lessons on the other side of this.