We spoke to Mike Hendrickson, Sr. Mortgage Consultant at U.S. Bank, to get his thoughts on mortgage forbearance during Covid. Here's what he had to say:
Every professional in the housing/mortgage market understands the crushing economic changes for many households as a result of coronavirus. It makes all the sense in the world for those households to pursue the forbearance option (skipping mortgage payments for 180-360 days) if needed. But it may make considerably less sense for those who aren't truly in need. Either way, the decision should not be taken lightly and its consequences are already being felt.
If we look beyond the impact on rates and program availability, there are other reasons a homeowner should think twice before requesting a forbearance they don't need. As the guidelines currently stand, there is no guarantee that they'd be able to refinance or get a new mortgage with forbearance on their credit report--especially if the forbearance is ongoing.
For those who've followed the forbearance and CARES Act news reasonably closely, the law states that there is to be no adverse credit reporting as a result of forbearance. While it is true that forborne payments will not be reported as late, the forbearance itself could still be reported.
While the forbearance itself is not affecting FICO scores, it can lead other lenders to make changes that cause scores to drop, and it can absolutely hurt your ability to buy/refi in the future. Please check with your lender when you apply for a new mortgage and have the discussion upfront if your current mortgage is in forbearance.
This article was prepared by:
Sr. Mortgage Consultant