Your most pressing forbearance questions answered featuring Rudy Benitez of Annie-Mac Mortgage

Back in March, the world began to come to terms with the effects of the global Covid-19 pandemic, in response Congress passed what’s known as the CARES act to help reduce some of the financial hardship that many Americans were facing.

As part of the CARES Act, lenders were able to grant homeowners the option of forbearance.  Now three months later, many homeowners still have questions about forbearance and how it can help them through this difficult time. 

We invited Rudy Benitez from Annie-Mac Mortgage to answer some of your most pressing questions about forbearance. 

Rudy Benitez with Annie-Mac Mortgage

Let’s start with something simple, what exactly is forbearance?

Rudy: Forbearance is when your mortgage servicer, that's the company that holds your mortgage statement and manages your loan, or lender allows you to pause or reduce your payments for a limited period of time due to a temporary hardship.

Understood, so what counts as a temporary hardship?

Rudy: This is subjective and of course depends on each lender’s guidelines. However, common examples are; child sickness, job loss, injury on the job, death of spouse or child, etc. 

There’s seems to be a lot of confusion between forbearance and loan forgiveness. What is the difference between forbearance and forgiveness?

Rudy: Forbearance is a limited time payment pause and or reduction. Forgiveness is the permanent removal of debt/interest from the mortgage balance. It’s easy for them to be confused but the best way to remember the difference is to think of forbearance as taking a breather or break from your loan payments not the loan itself. 

That makes more sense, so does forbearance protect someone from foreclosure?

Rudy: Unfortunately no, if at any point, you cease making agreed-upon payments a lender has the right to foreclose. However, requesting forbearance is a way to be proactive and opens a line of communication between you and your lender concerning your loan. 

So if forbearance is like taking a break, how long is the typical duration of a forbearance period?

Rudy: Because everyone’s situation is different the typical duration of a forbearance period depends purely on the situation and lender. If you are considering a forbearance I would contact your lender as soon as possible to get the right answers for your specific situation. 

Another question we’ve had on our minds is how will requesting a forbearance affect someone’s credit score?

Rudy: Usually, it won’t affect your credit. However, if you’re looking to refinance your mortgage (which will require a credit check and application process) most lenders will require that your forbearance period ends and payments begin under the new terms of your refi. 

So what’s the takeaway from all of this?

If you are seriously considering requesting a forbearance you should contact your lender as soon as possible, the sooner your lender is aware of the change in your situation the faster they can provide options for you.