SHIFT Magazine SHIFT Q2 Final Edition - Page 28

Karen Buelterman Arbor works with over 90 different lenders and each lender has its own Covid guidelines. These temporary guidelines can require higher credit scores, lower debt to income ratios, a lower loan to value, more reserves, and other tighter guidelines. It is similar to the lending implosion of 2008 but at least this time we know that this is a temporary measure. Lenders are worried about borrowers being laid off or furloughed and not able to pay their mortgage. Since rates are based on risk, the risker the borrower, the higher the rate. Rates were artificially high for several weeks so that the risk was baked into the rate. They are stabilizing now but they are not where they could be. The FHFA (Federal Housing Finance Agency) allowed borrowers to ask their lenders for a forbearance. The FHFA didn’t require that proof be shown that the reason for the forbearance was due to the Covid fallout. With that, more people applied for it than should have. There are 26,000 homeowners applying for forbearance every day. What many homeowners don’t realize, is that forbearance does not mean forgiveness. Many think that they can just skip their payments for 6-12 months and when their forbearance agreement is up, they can go back to business as usual. This is far from reality as lenders will tack the missed payments on the back of the note or spread out the missed payments over a certain amount of time. Fannie Mae and Freddie Mac have vowed to not require the homeowner to pay the delinquent payments all at once but to spread it out to make it more affordable.The best advice I can give is to contact a mortgage professional to see how applying for a forbearance will affect the credit and the ability to buy or refinance within the next year. The rules are changing constantly and it’s best to get the most up to date information. 30