Mortgage ‘Deferments’ Do Not Mean Relief, But Possible Payment In A Few Months

Part of the economic crash warnings that has been discussing is a serious drop in real estate prices as well as the inevitable flooding of the markets with surplus housing caused by overbuying. It will be a situation similar to 2007-2008, except much larger and with more consequences for the common man.

Right now as the US and world enters into her second month of shutdown because of COVID-19, there is a promise of ‘relief’ from some banks offering to defer mortgage payments for house lenders. However, it is appearing that a lot of these ‘deferments’ mean not tacking the house payments onto the end of the mortgage, or even actual forgiveness from obligations to debt, but rather a collecting of debt so that in the future, from may to possibly as far as July, up to four months of back rent will be due as is being warned by KRCR News.

At the start of the month, mortgage payments are due for everyone, included those who are newly out of work or furloughed.

The Coronavirus Aid Relief and Economic Security, or “CARES,” Act was just passed to provide temporary relief.
The key word is temporary.

Mike Lynch, a mortgage loan consultant at Amerifirst Financial in Redding, said he’s seeing lots of misinformation, and it’s confusing his clients.

The act allows for forbearance, not deferment.

Deferment means that if you can’t pay your mortgage in the short term, those payments are tacked on, or deferred, to the end of your mortgage.

The CARES Act doesn’t allow that. It offers forbearance as a last resort.

At the end of a six or 12-month period, all of the missed payments are due in a lump sum. If you can’t pay, you could lose your home.

“When the forbearance period is over, they will expect full payment, and they have the right to require you to make up the unpaid balance, and if you don’t there is a possibility that they could start the forbearance process, once the forbearance period is over,” said Lynch. (source)

Watch the housing markets carefully. When July comes, there is a possibility that a lot of people will be forced into making massive mortgage payments- four months worth -and with no guarantee that they will have been able to return to work, what is to say that they will be able to pay them?

Be prepared for a massive amount of foreclosures in July to August, thus causing further economic instability.

Remember too that has been warning that based on our estimates. there is a strong chance there may be a “lull” and then a sudden “resurgence” of COVID-19 in September.

It would be devastating to have the latter take place after the former has also happened.

It would destroy the morale of the nation, and cause massive public outrage.

Will it happen for sure? That is to be seen. What we do know is that given such indications of instability in the housing and lending markets, one should prepare for a flood of foreclosures and with that, a lot of people who will need to have rental apartments quickly.

Do you need to find a place to rent? One might want to secure that now before July comes.

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