In response to economic impact caused by Covid-19, many major lenders have issued advisories offering to allow mortgage clients to defer mortgage payments for three months. Fannie Mae and Freddie Mac, the largest providers of funds for conventional mortgages, agreed to implement the program in which deferred payments won’t be reported as delinquent to credit repositories.
It’s important to know, however, that all deferred payments are due at the end of the ninety days…along with the next regular payment. If they are not paid, Fannie Mae/Freddie Mac indicated that other arrangements may be made, but such loans would have to be reported then as delinquent.
If homeowners simply cannot make those payments, then being approved for the deferred payment option is better than becoming delinquent, but for those who can make the payments, but might choose to defer them “just in case”, I recommend against deferring any payments. The potential credit damage, and resulting increase in cost and/or rate for future financing (auto, revolving, etc.), including mortgages, makes the risk greater than the benefit of simply postponing payments for a short time.
These are trying times but, as always, they will pass. The good news is, that when people return to their jobs and the world becomes a little more normal again, it’s likely that rates will remain at, or near, recent all-time lows and it will be a great time to refinance or buy a home. Contact me to learn how to best prepare for when that happens.
