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Forbearance Risks

Article shared by Keith Endow, Real Estate Network of Los Angeles California.

Beware If You Decide To Delay Payments…

Centek’s Market Update

May 19, 2020
Stay Healthy & Safe!!!
(We are Open for Business!)

The new normal is trying to remember what day of the week it is…Hopefully, with social distancing and proper hygiene, we can all move forward in a new direction after 2 + months of grueling isolation from the COVID-19 virus. Let’s face it, no one wants to get sick, but we all want to have a life too!!

The first point we would like to discuss is the concept of entering into a forbearance agreement with any creditor… mortgage, auto or credit card. As soon as your credit is pulled by the lender, if there are any current modification agreements showing on the credit, your loan automatically becomes ineligible for any new financing. You need to be careful when speaking with any customer service representative at any institution. As soon as one asks about payment deferment, the lender automatically places the loan in the forbearance category…even if you do not tell them to proceed. If you have already initiated the payment deferment process, you will need to bring the loan current and wait for the creditor to send a letter stating the loan is now current. Only after receipt of this letter, would we be able to move forward with new financing. If one elects to enter and stay in a forbearance agreement, this will negatively impact potential financing in the future for quite some time. Please note, by no means are we stating not to enter into a payment deferral program if it is needed.

The mortgage world has been turned upside down as result of dislocation of the credit markets from the Coronavirus. Jumbo mortgages are much more restrictive and rates have actually risen fairly dramatically. Bank statement programs / Investor cash flow loans have entirely shut down. The conventional loans, however (loans on single-family homes up to $765,500) are wide open and rates are super aggressive. For people concerned about having an appraiser into their home, most of these loans are obtaining appraisal waivers or worst-case scenarios, exterior appraisals only!! Now is the time to act if you have a loan balance in this dollar range!!!

Let’s hope a COVID-19 vaccine is looming in the not too distant future and that some sense of normalcy can return. Will our lives ever be the same is the $64 question.

As always, we are available to discuss personal or client financing needs across the board—residential and commercial. Have a happy (as best we can) and safe, healthy Memorial Day Weekend and start of summer!! Stay tuned!!

Best Regards,
Gloria Shulman and Curtis Cohen and all of us at Centek.

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