A Debt is a Debt

March 8, 2021

All the hoopla surrounding certain wholesalers didn’t cover up the fact that last week we received a good look at the employment situation in the United States. Though nonfarm payrolls were better than expected (379k), Orion’s brokers know that jobs are still an issue. And it is hard to make a mortgage payment if you don’t have a job. While mortgage forbearances have been a lifeline for many borrowers during this pandemic, they won’t last forever, despite what seems like extension after extension. Orion’s management believes it is important for our brokers, and their clients, to understand current events, and their obligations, to reduce confusion and potential problems.

Brokers know that the purpose of forbearance is to let borrowers pause their monthly mortgage payments for up to 15 months under the CARES Act. For those that put their mortgage into forbearance early on in the pandemic, they may be required to start making payments on their loan again in the coming months. And forbearance is a foreign concept to some jumbo and non-QM investors.

Resuming monthly mortgage payments has the potential to cause financial unrest for hundreds of thousands of borrowers, but there are some solutions, albeit withdraw backs. Some lenders may be willing to grant extensions. Even though the forbearance period was extended an additional three months from the original360 days, that doesn't mean a borrower can't qualify for an additional extension. It would likely require a financial situation that hasn't improved over that time, but it may be worth it for many borrowers to at least ask. Lenders don’t have to grant that request, but may be willing to work with borrowers.

Another option for borrowers is asking to modify their mortgage. This could potentially be advantageous in the event that a borrower’s income has been reduced. With loan modification, the terms of the current loan are adjusted, rather than taking out a new mortgage. Lenders may agree to extend the number of years left on the loan, resulting in lower monthly payments.

 

Finally, for many borrowers, it may be worth refinancing with their broker into more favorable terms. While borrowers can't refinance while the loan is in forbearance, they are able to once they’re current on payments for three months once forbearance ends. With mortgage rates still near record lows, it may be a great game plan. While forbearance under the CARES Act will likely be extended again, the last thing borrowers want to do is exit forbearance unprepared and immediately fall behind on payments.

 

Orion’s AEs are a great source of helpful information to assist you. Never hesitate in asking.

 


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