Forbearance and How If Affects Real Estate

Covid changed a lot of things

In the middle of Covid and the shutdown lots of things changed. When the economy started to be impacted and job security was a concern, the federal government stepped in with the CAREA act. As part of the Cares act, home owners were offered the opportunity of forbearance for their federally backed mortgage.

Federally backed mortgages are loans that fall into a few different types. If your loan is an FHA or VA loan it is backed by the federal government. Similarly loans that are Fannie Mae or Freddie Mac would also fall into this category and were included in the opportunity for forbearance by the Cares Act. 

What is Forbearance

Forbearance is an agreement between the mortgage company and the home owner to temporarily stop payments on their home. The CARES act was originally for 6 months but could have been extended for up to 12 months. 

What Forbearance is NOT

Forbearance was NOT a loan forgiveness. The loan amount did not go down, and payments are still due, and likely just added to the back end of the loan. It’s also important to note that the interest on your loan is still accumulating as payments are not being made, causing the amount you owe to go up. 

If your loan was not federally backed, your lender could require the back payments to be made up in a lump sum. 

How does this impact selling a home?

If you chose to enter into forbearance, be sure to check with your loan provider for specifics on how your loan was impacted. This could cause some confusion later down the line between you, your lender, and the potential buyers when you are looking to sell. 

Because this was a new program that doesn’t have a long history with everyone in the real estate industry there is a great deal of unfamiliar rules and regulations. For people who manage real estate transactions all the time (lenders, attorney, paralegal, agents, etc) the rules imposed by the Cares act on real estate haven’t been repeated enough to become routine. There will be some hiccups and your team of professionals will need to be proactive and work together to insure the home closes with minimal delays. 

Closing in on 100….

I am excited to say that episode 100 is closing in quickly. I have them all produced and theres a lot of really good content coming your way to finish out 2022….AND I’ve already started making plans for 2023. If there is a topic you want to hear about please let me know and please share these with your circle of friends. I know someone you know is likely considering a real estate deal and I’d love to interview for the job of their agent. Until next time….Welcome Home!

Chris Whitehurst 

Rose and Womble 

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