By Staci Caplan
Santa Barbara Association of REALTORS®
Because of the financial impacts from the efforts to stop the spread of the coronavirus, homeowners may not be able to afford their mortgage payments. An option that may be available is Forbearance.
Forbearance is where you and your lender, or the loan “servicer” on behalf of the lender, agree to put your payments “on hold” for a specified amount of time. Usually there are no added fees or interest during the forbearance period. Be cautious when considering this option, as many servers will offer a payment plan which will increase the monthly payment when payments are resumed or will offer a loan modification to wrap the amount owed into a new loan. However, loan modifications are not possible for every homeowner. Many lenders have their own guidelines for loan modifications or forbearances. If your financial situation meets the guidelines, a loan modification is possible by documenting your financial hardship. If you do not meet the lender’s guidelines, a loan modification may not be possible. If you cannot pay off the forbearance and do not qualify for a loan modification, you may be at risk of losing your home if you are unable to resume payments.
Also, be cautious of scams falsely claiming that they can guarantee a loan modification or forbearance or stop a foreclosure. Avoid scams by contacting your lender directly to request a loan modification or forbearance that works for you and your lender. Take detailed notes about your calls, who you speak with, what was said, what you need to do, and what offers are discussed. You can do this yourself, without help from anyone and without paying someone a fee. If you cannot negotiate a loan modification yourself or if you do not want to, the U.S. Department of Housing and Urban Development (HUD) offers free housing counseling through HUD approved, non-profit agencies in California. Go to HUD’s web site at www.hud.gov to find counselors. You can work with a legitimate, licensed, and qualified person or company if you cannot negotiate a loan modification by yourself and decide not to use the free counselors provided through HUD. However, beware – you need to find someone who is legitimate, licensed, and qualified by experience and training. It is illegal for anyone (including DRE licensed persons and licensed attorneys) to demand, charge, or collect any advance, up-front, or retainer fees, or any other type of pre-payment compensation, for residential loan modification or forbearance services.
Red flags include any type of advance fee payment, guarantees of success, instructions to pay someone or some company other than your home loan lender or servicer, or being advised to miss payments to improve your chances of getting a loan modification. Following this advice will put you on the path to foreclosure.
The bottom line is be very careful when considering a forbearance option.
Staci Caplan is a California Real Estate Broker and the owner of Pacific Crest Realty. She was born and raised in Santa Barbara and her passion for this special region translates into successful real estate transactions and thrilled clients. At our local Santa Barbara Associations of REALTORS ® , Staci has served on the Board of Directors, the Government Relations Committee, the Budget and Finance Committee, the Multiple Listing Committee, and the REALTOR ® Action Fund Committee. She can be reached at (805) 886-3970 or firstname.lastname@example.org.