Can I Still Refinance If I Took a Forbearance Agreement Due To The Coronavirus?

Covid19 and the Coronavirus pandemic has really changed our world in the last few months. Our routines are different and with so much uncertainty still out there, our future is still foggy as we enter the fall of 2020.

Now let’s throw another log on the fire and talk about the CARES Act and one big negative that has come from this piece of legislation that was intended to help the American people. The CARES Act mandated that forbearance must be granted upon receiving a request for forbearance from a borrower and the borrower’s attestation to a financial hardship caused by the COVID–19 emergency. You could request forbearance prior to the pandemic, but you had to prove hardship and your loan servicer could deny your application and continue with foreclosure proceedings per the law. Th CARES Act got rid of having to qualify for a forbearance and opened the flood gates to anyone to request to miss mortgage payments for up to a year if necessary.

As a company we started fielding phone calls from borrowers asking about their forbearance options and what to do. My answer was very simple, if you need it then take it, but if you can make your payments please continue to do so. The mortgage industry is reliant on the flow of money and capital to continue to have any capacity for future lending. If homeowner’s stop making their mortgage payments the cycle stops, money dries up and the mortgage industry is in big trouble.

We saw this in March and April of 2020, our industry came to a screeching halt because of the pandemic, people losing their job and the CARES Act new mandatory forbearance option. We narrowly escaped with the hair on our chinny chin chins and fast forward 3 months later, mortgage lending is still not back to normal, but we are seeing a light at the end of the tunnel.

The initial wave of forbearances was scary to see, but another shock wave would soon rear its ugly head and make my job as a loan originator even tougher than it already was – Large Servicers and Lenders appeared to be granting forbearances to anyone that even asked about it. We hit a wave of people who didn’t apply for a forbearance were suddenly finding out their loan was in forbearance. Client after client looking to refinance were all showing up in forbearance as we pulled their credit reports.

“What??, I only clicked the more info box in my online banking to find out what it was all about, but I never signed anything or pursued it further when I found out all the details .” This became the repeat conversation I had with each new client when I told them they were in a forbearance currently. It was nerve racking to say the least to be having this conversation in April because when a loan goes into forbearance both Fannie Mae and Freddie Mac have guidelines that disqualify the homeowner from getting another mortgage for 2 years once they finish the agreement and pay back all the money owed.

That’s when the other shoe dropped. I quickly realized that these large lenders and servicers may be doing this on purpose to protect their pipeline from mass refinances because of he plunging mortgage rates. Hmm, what a great strategy to keep higher rate business on your books – cut them off from being able to refinance while rates are low due to the Covid19 pandemic. Its evil genius in my opinion, but at that time I had no answers for my clients that this happened to.

I tip my hat to the Federal Housing Finance Agency (FHFA), they caught wind of this situation and acted quickly in government terms. On May 19th, both Fannie Mae and Freddie Mac announced that they would loosen the forbearance guidelines and allow homeowners to refinance if they were involved with a forbearance agreement due to the Covid19 emergency.

The guidelines were released and we got right to work going back to those clients that the door was shut in their faces just weeks before. If this is your situation then see below the new guidelines that will allow you to refinance and take advantage of the lowest rates we have ever seen:

Under the temporary eligibility guidelines, effective immediately, homeowners who missed payments and entered into a loss mitigation solution – such as a repayment plan, payment deferral, or loan modification – are eligible for a new refinance or purchase mortgage after three timely payments.

There also is no waiting period for borrowers who requested forbearance due to a COVID-19 financial hardship but ultimately were able to make all their payments in full and on time.

Contact Us Today to discuss your situation and find out if you can refinance even though you were involved with a Forbearance. Wiser Lending has been navigating the pandemic and guiding our customers into the best loans for their situation. I believe knowledge is power, so the more you know about our industry the better mortgage consumers you will become.

If you and your family have been affected by the Coronavirus Pandemic please click the link for more information directly from the Consumer Finance Protection Bureau to help you understand your options during these uncertain times. Click Here to Learn Your Options

Stay Safe Everyone!

Eric Weishaar

President | NMLS# 207659