Mortgage Forbearance

User Forum Topic
Submitted by barnaby33 on April 15, 2020 - 10:41am

What if any downside is there to asking for 3 months mortgage forbearance? There seem to be no late fees or penalties. It gives you 3 months to hold on to a wad of cash and if something negative happens to you during those 3 months, then you've got cash! What am I missing here?

Josh

Submitted by Coronita on April 15, 2020 - 11:57am.

In addition to the ethical dilemma of lying and saying you are going through an economic hardship when you really aren't, I don't think the banks simply just give it to you. My understanding is you need to actually provide proof of an economic hardship in order to qualify (IE proof of unemployment, reduced earnings etc)... Even the county's assessor's office allows you to apply for a penalty waiver, but you also need to provide proof of an economic hardship.

Second, my understanding is the loan amount you don't pay simply gets tacked on the end of your loan, and during that time I believe interest is still be charged. I could be wrong about that. Also, unless they changed the terms, some of the loans don't allow you to tack on the missed payments at the end of the loan. They are due in full after the 3 months.

I generally don't try to play this sort of game. Maybe because I'm superstitious, but I just think that if you pretend to be going through an economic hardship in order to take advantage of a situation, it always has a mysterious way of coming back and biting you in the ass in some weird way.

Submitted by scaredyclassic on April 15, 2020 - 12:02pm.

Coronita wrote:
In addition to the ethical dilemma of lying and saying you are going through an economic hardship when you really aren't, I don't think the banks simply just give it to you. My understanding is you need to actually provide proof of an economic hardship in order to qualify (IE proof of unemployment, reduced earnings etc)... Even the county's assessor's office allows you to apply for a penalty waiver, but you also need to provide proof of an economic hardship.

Second, my understanding is the loan amount you don't pay simply gets tacked on the end of your loan, and during that time I believe interest is still be charged. I could be wrong about that. Also, unless they changed the terms, some of the loans don't allow you to tack on the missed payments at the end of the loan. They are due in full after the 3 months.

I generally don't try to play this sort of game. Maybe because I'm superstitious, but I just think that if you pretend to be going through an economic hardship in order to take advantage of a situation, it always has a mysterious way of coming back and biting you in the ass in some weird way.

Trump fucked over 1000s of small contractors [Including my moms buddies husband, a roofer trump just flat out stiffed and sent into bankruptcy!] by not paying and no karmic retribution yet for trump.
And anything short of imprisonment for him and all his kin I'd say will fall short, karmically.

. I'd say its just generally not true that we get bad things directly happen to us when we do bad.

But there are other reasons not to scam the system regardless of whether it helps or hurts u.

Submitted by Coronita on April 15, 2020 - 12:14pm.

scaredyclassic wrote:

Trump fucked over 1000s of small contractors [Including my moms buddies husband, a roofer trump just flat out stiffed and sent into bankruptcy!] by not paying and no karmic retribution yet for trump.
And anything short of imprisonment for him and all his kin I'd say will fall short, karmically.


...yet.... But, I wouldn't count on waiting for a payback. Seems like people who do, often get disappointed....

Quote:

But there are other reasons not to scam the system regardless of whether it helps or hurts u.

...yet....payback happens when you least expect it....
Pretend you're unemployed --> get unemployed.

Wish for a huge housing crash --> watch your local area have a major job loss and rent-ability in question for your own property.

Try to scam the system by faking an economic hardship -> get paired up with a tenant that ends up doing it to you.

Wishing for a pandemic to get people sick and sterilize people --> end up getting sick yourself or watching someone you know get sick, if not now, at some point.

Now, certainly if you don't believe in karma, and think it's bullshit, that's fine too..You still have to jump through the hoops that the banks might have in place. And then if you do at some point in time get screwed over, don't expect a lot of sympathy from anyone else.

Submitted by scaredyclassic on April 15, 2020 - 1:06pm.

Bad things happen to good people.

Good things happen to bad people.

In about equal measure.

Submitted by barnaby33 on April 15, 2020 - 2:12pm.

In my case, my income has declined rather precipitously recently due to my wife being laid off and all of our guests cancelling. However I wasn't asking just for myself.

You use the words "ethical dilemma" as if they had some special meaning in our world anymore. Isn't an "ethical dilemma," an 1/4 modifier or something?

The universe most definitely doesn't bite most of the ethically challenged in the rear. To my knowledge the only person punished during the financial crisis was Martha Stewart.
Josh

Submitted by Coronita on April 15, 2020 - 2:46pm.

If you have to ask along the lines of "is there anything wrong if I were to do this?", you already have an ethical dilemma. Because if you didn't, you would just do it and not bother to try do justify your actions because you wouldn't care.

But that aside, there's been numerous cases that even people with legitimate reasons to ask for a mortgage forbearance, banks are making those folks jump through hoops to prove there is a financial hit. It's hardly worth the effort of 2-3 months even if you could jump through those hoops.

If your main concern is having emergency cash on hand, this is probably not the best way to go about this since possibly it's only good for 2-3 months, hardly enough cash to really bridge a family over for a real recession. There's better ways to setup an emergency loan, and it's probably better to do it while you still have a job.

Plenty of people were punished during the last great recession, many of them lost their homes, and some of the rest of us were able to buy at really cheap prices, right? That was during a period were there was irresponsible borrowing... I'm not so sure this type around it's really about irresponsible borrowing... I think it's just more about bad luck. How often do we consider a pandemic event. Maybe every 70 years or so?

This event is hitting almost everyone across the board in the service sector that has a job/business that requires any human-human contact that isn't deemed as "essential"... This isn't just your hourly restaurant workers, but those business owners, dental offices, gyms, real estate professionals, etc,etc, where there is no online/at home option. It hits low income earners, middle income earners, high income earners, and business owners...arguably punishing business owners more so than workers... I don't see this as a blanket "irresponsible borrowing" this time around for those impacted. Maybe some, not all or even most.

I had a colleague that that recently had to relocate and rather than stay with us a few months longer, he decided to take a job with another company where he's moving to..and takes 2 weeks off to relocate...Something anyone would have done if they were relocating. Then the virus hit, and the lockdown orders happened. That other company ended up postponing his start date week by week for 4 weeks. Now, 4 weeks later, he gets a call that they rescinded his offer. He's screwed now. He doesn't have a job, he can't apply for unemployment because he voluntarily left my company. Shit happens.

Submitted by scaredyclassic on April 15, 2020 - 2:52pm.

definitely not an "ethical dilemma"

"Ethical dilemmas, also known as a moral dilemmas, are situations in which there is a choice to be made between two options, neither of which resolves the situation in an ethically acceptable fashion."

Submitted by Coronita on April 15, 2020 - 2:56pm.

Fine. Do what you guys want....More power to you.

While you are at it, eat half of that rotisserie chicken you bought at costco, and then return it saying it tastes bad to get your $4.99 back.

Or buy a plant from home depot, plant it, and then before the 1 year mark, if you don't like it, dig it back up and take it back to home depot and say it didn't grow well to get your $20 of so back.

Same thing. And other people do it. Why not?

Submitted by barnaby33 on April 15, 2020 - 3:19pm.

While you are at it, eat half of that rotisserie chicken you bought at costco, and then return it saying it tastes bad to get your $4.99 back.

Or buy a plant from home depot, plant it, and then before the 1 year mark, if you don't like it, dig it back up and take it back to home depot and say it didn't grow well to get your $20 of so back.

I did both of those just last week!

Leaving aside your point about ethical dilemma, is there a reason not to do it? So far you've mentioned the hassle, that is at least real. However if you're at risk of losing your job in the foreseeable future (as most of us are), then delaying the payment would seem to be a no brainer even if it does cause you to have to make a big decision in 3 months; namely pay it all back, or claim you can't.

Other options, like getting a HELOC titled now, if possible also seem good. I'm really just trying to illuminate the contours of how to navigate the economic reality of now.

I've already lived through one massive episode of the govt fucking me with my own money. I really don't want to do that again and so maximizing my financial preparedness is a valid process.

Submitted by Coronita on April 15, 2020 - 3:46pm.

barnaby33 wrote:

While you are at it, eat half of that rotisserie chicken you bought at costco, and then return it saying it tastes bad to get your $4.99 back.

Or buy a plant from home depot, plant it, and then before the 1 year mark, if you don't like it, dig it back up and take it back to home depot and say it didn't grow well to get your $20 of so back.

I did both of those just last week!

Leaving aside your point about ethical dilemma, is there a reason not to do it? So far you've mentioned the hassle, that is at least real. However if you're at risk of losing your job in the foreseeable future (as most of us are), then delaying the payment would seem to be a no brainer even if it does cause you to have to make a big decision in 3 months; namely pay it all back, or claim you can't.

Other options, like getting a HELOC titled now, if possible also seem good. I'm really just trying to illuminate the contours of how to navigate the economic reality of now.

I've already lived through one massive episode of the govt fucking me with my own money. I really don't want to do that again and so maximizing my financial preparedness is a valid process.

I opted to get a HELOC loan for the very reason of bridging short term financing needs and emergencies. Imho, while one is still employed, you can easily qualify for some of these loans. But when one is most financially vulnerable after losing a job, banks won't want to lend you squat. The HELOC I have is no cost, and as long as I don't use it there's no fees or interest, and it's good for about 10 years. The HELOC I have is prime rate - 0.25% and the maximum rate is capped at 8% if we ever see high interest rate environment again. You can probably find something better.

As for the mortgage forbearance, I have no idea what the future implications are, if there are any on refinancing. But if you did have a significant change in household income, then well why not?

Submitted by svelte on April 15, 2020 - 7:03pm.

I can see both sides of this.

On the one hand, I definitely live by the rule what goes around comes around and try to be self sufficient and ask for as little as possible.

on the other hand, it does sound like Josh is taking a financial hit and neither he nor the rest of us have any idea of what the next 6 to 12 months will look like. I can imagine myself in situations where I may try to conserve my cash as much as possible right now and as a matter of fact have taken some steps in that direction myself - though not anything to do with my mortgage as I still want to pay that puppy off ASAP. Sick of owing the bank.

Submitted by FlyerInHi on April 15, 2020 - 7:42pm.

scaredyclassic wrote:
definitely not an "ethical dilemma"

"Ethical dilemmas, also known as a moral dilemmas, are situations in which there is a choice to be made between two options, neither of which resolves the situation in an ethically acceptable fashion."

Everything you write speaks do me. I feel like I get it whenever you write it.

Submitted by spdrun on April 15, 2020 - 8:25pm.

Here's the question ... if the government allowed banks to utterly shaft their debtors, do you think they'd take advantage?

Submitted by Coronita on April 16, 2020 - 8:28am.

speaking of moratorium on evictions. This is an interesting read

https://www.miamiherald.com/news/busines...

Quote:
Some landlords may not realize the new federal CARES Act, which was approved by Congress on March 27, applies to them. The law placed a 120-day moratorium on eviction proceedings and interest fees on late rent in buildings that receive any kind of government subsidy or are part of federally backed VA loans and mortgages sold to Fannie Mae or Freddie Mac.

What if you don't have any mortgages? seems me that it means the federal moratorium is not applicable. you are still subjected to state and local laws

Submitted by Coronita on April 16, 2020 - 12:32pm.

.

Submitted by barnaby33 on April 16, 2020 - 5:41pm.

Obviously asking for forbearance is kicking the can down the road, but that is pretty much all our society does anymore.

Wall St and the banks aren't the cause of this crisis, they're the cause of the LAST crisis from which we never emerged.

I'm asking the question I did, because I want to stimulate thought about how each and every one of us is going to get through this whole. There is a whole lot more financial pain coming, we've only just begun the process of getting over this virus and our govt has just printed 2 Trillion dollars.

At least this time, some of it is going to the man on the street (or he'll soon be living there.)

Josh

Submitted by Coronita on April 16, 2020 - 5:50pm.

barnaby33 wrote:
Obviously asking for forbearance is kicking the can down the road, but that is pretty much all our society does anymore.

Wall St and the banks aren't the cause of this crisis, they're the cause of the LAST crisis from which we never emerged.

I'm asking the question I did, because I want to stimulate thought about how each and every one of us is going to get through this whole. There is a whole lot more financial pain coming, we've only just begun the process of getting over this virus and our govt has just printed 2 Trillion dollars.

At least this time, some of it is going to the man on the street (or he'll soon be living there.)

Josh

If you don't mind me asking,

1. how much is left on your mortgage

2. how much is your monthly mortgage

that will give a much more accurate picture of how concerned you really need to be.

Submitted by FlyerInHi on April 16, 2020 - 6:56pm.

Why not kick the can down the road?
Some people like to play zero % on credit cards and arbitrage that way. Same thing... takes effort if you think it’s worth it.

Submitted by svelte on April 16, 2020 - 7:28pm.

barnaby33 wrote:

Wall St and the banks aren't the cause of this crisis, they're the cause of the LAST crisis from which we never emerged.

You know, it's always felt that way to me too. Not me personally, but looking at the bigger picture.

barnaby33 wrote:

I'm asking the question I did, because I want to stimulate thought about how each and every one of us is going to get through this whole. There is a whole lot more financial pain coming, we've only just begun the process of getting over this virus...

yeah, I think a lot of us including me felt that once things peaked, then around summertime it would all start being just a memory.

This was the week where it dawned on us all that is not going to happen. We've held the number of cases down pretty well, and that just means a much wider curve.

I think the only chance we have of getting to something approach normalcy this year is if a vaccine is discovered early on.

Which begs the question you're asking...how should each of us handle this year? Hoard cash? Just be conservative? Buy while things are cheap?

Submitted by Coronita on April 16, 2020 - 8:29pm.

imho if you can't cover 2-3 months of your mortgage without your paycheck, that's a pretty sorry state of affairs. You have no business being a homeowner. Don't they say you should have about a year's worth of emergency funds?

I sort of can understand if you own multiple homes in a area where the economy comes grinding to a halt and no one is paying your rent on time and you managed to spread yourself so thin that your cashflow is really bad and your cash reserves are non-existent
....but we are talking about 1 home, owner occupied, in a family with two incomes. So again, I'll ask what's remaining mortgage balance and what's the monthly mortgage amount?

If we are talking about a measly $1000-2000/month, it's almost not worth the time or effort to defer paying $3000-6000 total over 3 months. Even if you could put your money into something higher return, you aren't going to really make that much money from arbitraging $3-6k over 3-4 months. Plus you need to waste your time arguing with the banks just to qualify. Time is money.

Time spent trying to defer 3 months of mortgage would probably be better spent trying to refinance an existing loan to the rock bottom rates we now have, so one can lower monthly payments or total interest paid or both over the remaining 15 year or ep year loan term ...assuming you still have a household income.to qualify with....you could probably get that money back refinancing your existing loan to a lower rate, while you still have a job and income to qualify for a new loan... Pick where you want to spend your limited time.....since loan forbearance and refinancing are probably mutually exclusive....I'd like to see someone try to refinance into a lower rate loan right now and at the same time trying to ask for a 3 months loan forbearance.....lol.

And consider this. Let's say you have a job and financially ok right now, but you decide to play this forbearance game... Bank gives you 3 months forbearance, so you think you are good. 3 months pass, you don't bother to refinance your existing loan to a lower rate thinking you'll do it after 3 months....but then the economy gets worse and you really do lose your job. Try refinancing to a lower rate after you are unemployed with no income......Good luck.... Congrats. you just blew your chance of refinancing to a lower rate, lower monthly, and lower total interest...and you are still stuck with your existing mortgage, which has now been extended by 3 months

Submitted by svelte on April 16, 2020 - 8:30pm.

Coronita wrote:
. So again, I'll ask what's remaining mortgage balance and what's the monthly mortgage amount?

Well to be perfectly honest, all of us know that just leads to the next question: how much are you bringing in each month?

And for Josh to give us his complete financial picture on a public forum wouldn't be very advisable in my opinion.

So you can ask. I'm just not sure you're gonna get an answer, especially if Josh is like me.

I can count on my fingers the people who know my complete financial picture and (a) they are all family, and (b) that is by design. My grandfather told me way too many stories from the early 1900s about people getting murdered for their money. The conversations are still vivid in my mind. He was 6 ft 4 and quite the storyteller...one especially vivid memory is him talking to me while we waited out a thunderstorm huddled together in a Ford on the edge of a lake in North Dakota..."don't touch metal!" he said, for fear we'd get struck by lightning and die. He then proceeded to tell us about a family who was murdered in their home because they had told everyone about their safe full of cash.

But I digress.

Submitted by Coronita on April 16, 2020 - 8:57pm.

He doesn't need to provide any of his financial information. I could care less. But I would hope at least he goes through the financial exercise and also thinks about opportunity cost he could be giving up.

If his current loan is .5% or higher than what he could get right now via refinancing, to me refinancing seems like a much better option because you can lower your monthly payment and also save on interest... After a refinance , he could still make the same monthly payment on his new loan so that more of it goes toward principle upfront, over time he could bring in the loan a few years....BUT if the shit hits the fan, he can revert back to the new lower monthly payment if there is a cash crunch. That's how I essentially brought my 30 year into a 15 year and paid it off in 10. I was making roughly the same mortgage payments all along, and any extra windfall went directly to the principal. I didn't like the opportunity cost of trading off safety for of no mortgage versus putting everything into a higher return investment back then. Well, funny how quickly that changes.

If you believe 3 months from now your financial situation would significantly change, and you can get into a lower rate loan now, I'd rush to get that done as soon as I could.

You can't get a new loan or refinance once you are unemployed or significantly furlowed.

Submitted by PCinSD on April 16, 2020 - 9:11pm.

FlyerInHi wrote:

Everything you write speaks do me. I feel like I get it whenever you write it.

Ikr?

A rare, yet not entirely unexpected Adult Hallmark moment right there. Please update us if you guys hookup.

Submitted by barnaby33 on April 16, 2020 - 9:59pm.

A lower rate won't buy most of us much. 3 months of cash cushion might. Lets take Coronita's argument for a test drive. Without giving details I'll just say, my mortgage rate isn't going to go much lower and certainly not enough to justify a refi. My family income is down quite a bit, though as of right now I'm certainly not looking over the abyss. I do have savings, I'm not a retard. However those savings are invested, nobody just keeps their money in a mattress not earning interest, the Fed has made sure of that.

So rubber, meet road. I apply for forbearance and miracle of miracles I'm granted it. I get 3 months to save up money I would have spent on my house payment. Sure in 3 months I'll have to pay it, but 3 months is a long time in Corona-ville. I'll have thousands more dollars of dry powder when I have to make a decision. Do I pay the money back or hold onto it and try whatever comes next.

What comes next you might add? I don't actually know, but I suspect. If you were paying attention last time around the Fed played kick the can by allowing the banks to FLAT OUT LIE about their accounting. It also gave them massive cash infusions at below market rates. No perp walks, no cram downs, nothing. This time around the pressure is already mounting to make the relief more consumer oriented. I could absolutely see the govt saying, ok you're arrears, we'll buy down a bit of your mortgage or re-finance you at even lower more ludicrous interest to keep you paying something. It would allow the Fed to buy even more paper and not punish any of the people who need a giant financial ass kicking.

So in my fantasy world I'd get 3 months deferral as an intro to a refinance. Now if I were low on equity that is absolutely a bet I'd take. Especially if I were a student of real estate recessions and knew that bottoms were years away.

So why wouldn't I take the forbearance? If there is zero or low cost it seems like nothing but upside. I mean seriously if you are arguing moral hazard you simply have not paid attention to the entire last decade. Every single entity that was on the Fed bailout tit has become larger and more systemically important at your/my/our expense. You aren't going to fix that with elections, so the best you can do as a moral human is role with it and try not to drown in what's coming.
Josh

Submitted by Coronita on April 16, 2020 - 10:43pm.

Seems like you made up your mind even before posting this thread. since you got it all figured out, I'd say go for it then. Good luck. Hope you get whatever you're trying to get out of arbitraging 3 months worth of mortgage.

I didn't say you were a moron, it's pretty obvious you aren't. But since no one should be 100% invested all the time, I'd figure you would have some invested and some in cash for emergencies and you would adjust that percentage based on the prevailing economic climate as most rationale people would do, and those extra 3 months are almost like needles in a haystack.

But if you just sort of have sour grapes that some people are getting a bailout and you feel like somehow you are losing out if you don't try to grab some of these forbearance bailout, as it sounds like in your last post, and you will be upset that other people got something and you didn't, then maybe it's worth it for you to do it since it seems like it would make you happy that you got some cheese.

I don't know what you are really trying to accomplish here, since you don't seem to need the 3 month of deferred money. But do what makes you happy.

Submitted by Coronita on April 16, 2020 - 11:25pm.

Oh, and it's erroneous to compare doing this to playing with $0 credit card balance transfer offers to push out a balanced owed on one credit by transferring to one or multiple cards.

Playing the $0 balance transfer offers with credit cards, you arent doing anything to misrepresent your finances in order to play the game, unless you lied on your credit application to get more credit cards. There's no dishonesty involved in this game.

Trying to take advantage of this mortgage forbearance when you really don't have a financial hardship is basically misrepresenting your finances IE dishonest. That's like having a front line ER doctor, living in an area hard hit with a lot of job losses where the majority of the tenants are hourly workers in retail or entertainment who really can't pay their rent now, telling his landlord he refuses to pay rent for the next 3-4 months because he was financially affected by the coronavirus like everyone else, but in reality he's working and being paid everyday+overtime. Or someone that rents an AirBnb rental from a host, and on the last day, drops a bunch of bedbugs into the room, intentionally gets bitten, and wants a full refund for his/her stay.... I guess there's nothing wrong with that too.

Submitted by FlyerInHi on April 17, 2020 - 12:20am.

Barnaby said his income went down quite a bit. So if he’s like most Americans, he can no longer afford to pay his mortgage. Not sure what the standards are, but I would encourage Americans to apply based on 1/3 of income cost of housing.

I don’t know barnaby’s situation, but generally speaking, if you have a loss of income, yes, definitely apply. The worse they can do is say no.

Submitted by FlyerInHi on April 17, 2020 - 12:22am.

PCinSD wrote:
FlyerInHi wrote:

Everything you write speaks do me. I feel like I get it whenever you write it.

Ikr?

A rare, yet not entirely unexpected Adult Hallmark moment right there. Please update us if you guys hookup.

Scaredy is the most beautiful writer here. There’s a certain quality, a je ne sais quoi. I am in admiration, in love.

Submitted by ltsddd on April 17, 2020 - 7:09am.

barnaby33 wrote:
So why wouldn't I take the forbearance? If there is zero or low cost it seems like nothing but upside. I mean seriously if you are arguing moral hazard you simply have not paid attention to the entire last decade. Every single entity that was on the Fed bailout tit has become larger and more systemically important at your/my/our expense. You aren't going to fix that with elections, so the best you can do as a moral human is role with it and try not to drown in what's coming.
Josh

Go for it. If this crossed your mind then that means you probably fear for the worst. It's a prudent thing to take steps that you think would alleviate some of the stress/pressure. At the end of the day you must do what's best to protect you and your family. The system is set up for people to apply. It's up to the people on the other side of the table to make the decision to approve or not.

I personally think this bailout, like many before and after, is skewed to enrich the super rich. While the peasants get peanuts.

munchkin thinks $1200 should lasts 10 weeks:
https://www.businessinsider.com/mnuchin-...

while the rich are going for the bigger piece of the pie:
https://www.bloomberg.com/opinion/articl...

https://www.marketwatch.com/story/its-a-...

Submitted by svelte on April 17, 2020 - 7:39am.

Coronita wrote:

If his current loan is .5% or higher than what he could get right now via refinancing, to me refinancing seems like a much better option because you can lower your monthly payment and also save on interest... After a refinance , he could still make the same monthly payment on his new loan so that more of it goes toward principle upfront, over time he could bring in the loan a few years....

I think you've answered your own question with the "over time" words.

Refinancing wouldn't get him NEAR as much cash up front during CV as not making payments would.

Let's run a theoretical. Say he has a loan in the 450K range. Not unusual for the San Diego.

And if you think it would make sense to refi if he can save 0.5% interest rate. Let's start him out at 4.5% and say he can get down to 4%.

A current 4.5% loan would be $2,281 mo for 30 years
A refi-ed 4% loan would be $2148 mo for 30 years

He'd save $133 a month. In three months time, he could save $6800 if he didn't make the payments, or $400 if he refinanced. Not even close.

Let's say he was able to skip a payment during the refi process (also pretty common)...that would make it $6800 to $2900.

Still not close. If you need money right now and in the short term, refi is not the way to get it. Not making mortgage payments is.

In the real long term, refi is the better solution obviously.

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