Forbearances Under the CARES Act are Coming to an End

Filed under: Forbearance

September is marking the end of the forbearance run from the CARES Act as part of the COVID stimulus program. This forbearance program allowed homeowners to use forbearance if they couldn’t make their mortgage payments (the process of deferring the payments during the pandemic).

Options When Coming Out of Forbearance

Now we are 18 months later, and the program is coming to an end. Statistics on this program are strangely difficult to access. My understanding is that 2 million homeowners are currently in forbearance. Apparently, some of them have continued to make their payments, so I’m not sure what that is all about.

There are potentially a few million people who are about to come out of forbearance. It matters how you come out of the program. Here are a few strategies that I’m seeing:

  • Most people coming out of forbearance have the option to take the full balance owed and put it on the end of the mortgage.
  • I’ve seen a few people make a one-time, lump sum payment to get caught up.
  • Some people take the amount due and spread the payments over 12 or 15 months.

For anyone who started forbearance early, they might not have had the option to use today’s interest rates. Forbearance basically froze the mortgage. Consider the option to refinance after coming out of forbearance to take advantage of the current low interest rates.

Will it Affect Your Credit Score?

None of these things should have any impact on your credit score. But, be cautious about working with lenders offering modifications. A few are using modifications outside the CARES Act, which could cause you issues with financing down the road.

If you have questions about forbearance or refinancing, reach out to me or someone else who understands the CARES Act and how to protect your finances. There are some people in the industry who are just trying to get things done, without thinking about what is best for the client long-term. It’s easy to make a mistake in this situation.

If you aren’t sure what you are doing, get with a provider who knows how to best help. I’m happy to assist with the mortgage side of things – call any time.

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