how will forbearance affect my future investment now

17 Replies

Hi Rafael - I pulled back my forbearances in 5 properties after one month after one bank said they would be cautious due to not thinking I had managed my cash flows well.

It was funny when I called the three banks involved in my forbearances.  When I called and told them that I didn’t need it after all, all three had to figure out the paperwork because no one had ever asked them to cancel.

Originally posted by @Mark H. Porter :

Hi Rafael - I pulled back my forbearances in 5 properties after one month after one bank said they would be cautious due to not thinking I had managed my cash flows well.

 I've heard at the end of the 6-12 months of forebearance there will be an option to modify the loan.  You might get a much lower rate and then you could possibly defer the owed money to the end of the loan

I am assuming that cares act and government will step in and force them too. So anyone who didn't take forbearance didn't get to take advantage of a really good loan mod

@Rafael Trinidad  If you're going to be in the market for a loan again in the near future, I wouldn't do it.

I don't think anyone knows for certain how lenders will look at a forbearance the down the road, and each lender might look at it differently. But the general consensus on here from people in the business and with experience on the matter seems to be that at least some lenders will look at it negatively. 

Here’s a few of the other previous posts where this has been discussed:

https://www.biggerpockets.com/forums/49/topics/830208-mortgage-forbearance-ramification

https://www.biggerpockets.com/forums/888/topics/820841-forebearance-deferral-good-or-bad

https://www.biggerpockets.com/forums/52/topics/829313-mortgage-forbearance-impacting-credit-score

@Susan O. Susan , I had only applied for and awarded 90-days forbearance. I wasn't offered anything near 6-12 months. As to the terms, the banks were different. Some just extended the balloon date, others just captured the interest earlier in the earlier Payments.


Originally posted by @Kyle J. :

@Rafael Trinidad  If you're going to be in the market for a loan again in the near future, I wouldn't do it.

I don't think anyone knows for certain how lenders will look at a forbearance the down the road, and each lender might look at it differently. But the general consensus on here from people in the business and with experience on the matter seems to be that at least some lenders will look at it negatively. 

Here’s a few of the other previous posts where this has been discussed:

https://www.biggerpockets.com/forums/49/topics/830208-mortgage-forbearance-ramification

https://www.biggerpockets.com/forums/888/topics/820841-forebearance-deferral-good-or-bad

https://www.biggerpockets.com/forums/52/topics/829313-mortgage-forbearance-impacting-credit-score

 Kyle we don't know it might actually be a huge benefit for those who deferred. They might get the chance to have the payment partially forgiven, or a complete loan modification down to sub 3% in rate. We don't know whether it's going to be benefit or not. I'm thinking on gove backed mortgages they will make it very nice for people who had forebearance. Perhaps give 2.5% loan rate or even do a 40 year payment on low interst like 3%  
It already seems the government and cares act will do anything to prevent a depression so they'd likely step in and keep people from foreclosure. I could even see 2% rate and lowering payments with some forgiveness for some home owners...

Originally posted by @Mark H. Porter :

@Susan O. Susan , I had only applied for and awarded  90-days forbearance.  I wasn’t offered anything near 6-12 months. As to the terms, the banks were different.  Some just extended the balloon date, others just captured the interest earlier in the earlier Payments.

 Yours wasnt' fannie or freddie backed like the majority of loans?   Some banks let you do 90 days then keep kicking it 90 more

Originally posted by @Susan O. :
 Kyle we don't know it might actually be a huge benefit for those who deferred. They might get the chance to have the payment partially forgiven, or a complete loan modification down to sub 3% in rate. We don't know whether it's going to be benefit or not.

It's one thing if someone absolutely needs a forbearance because they just simply cannot find a way to pay their mortgage. However, he didn't say that was the case here. He just asked how forbearance will affect him on obtaining future investment properties.

I can pretty much guarantee a future lender is not going to look at it as a big positive if he ends up going with forbearance or getting a loan modification or any sort of loan forgiveness as you suggested.

Best case scenario is he finds a lender who doesn’t penalize him for that, but there certainly isn’t going to be a “huge benefit” when he goes shopping for his next loan and they find out he wasn’t able to make the payments on his current loan or it had to be modified or partially forgiven.

Originally posted by @Kyle J. :
Originally posted by @Susan O.:
 Kyle we don't know it might actually be a huge benefit for those who deferred. They might get the chance to have the payment partially forgiven, or a complete loan modification down to sub 3% in rate. We don't know whether it's going to be benefit or not.

It’s one thing if someone absolutely needs a forbearance because they just simply cannot find a way to pay their mortgage. However, he didn’t say that was the case here. He just asked how forbearance will affect him on obtaining future investment properties.

I can pretty much guarantee a future lender is not going to look at it as a big positive if he ends up going with forbearance or getting a loan modification or any sort of loan forgiveness as you suggested.

Best case scenario is he finds a lender who doesn’t penalize him for that, but there certainly isn’t going to be a “huge benefit” when he goes shopping for his next loan and they find out he wasn’t able to make the payments on his current loan or it had to be modified or partially forgiven.

 The benefit could be several months in cash reserves versus being in more debt.  Especially if theres another spike in covid and this time less stimulus.  We could go 6 months-12months plus of non paying tenants.  then you could wish you got the forebearance and got a mortgage loan modification

What if you applied for forbearance and never used it. That should not ding your credit or good standing right? 

We waited hours on the phone with our 2 lenders to get setup in March, preparing for the worst and hoping for the best. Turned out we never missed a payment....one of the lenders contacted us about the odds of using it and if it should remain open, we told them to end the program. 

https://www.youtube.com/watch?v=VhJEoOqENWQ

Meet kevin on youtube. He is a real estate expert said how if you don't pay for 12 months the bank will most probably tack payments to the END of the loan. Also that the Cares act really protects the mortgagee so it is in some peoples interst to take it. I would do so and take the reserves to use for rainy day as this could get much much worse.

Originally posted by @Kyle J. :
Originally posted by @Susan O.:
 Kyle we don't know it might actually be a huge benefit for those who deferred. They might get the chance to have the payment partially forgiven, or a complete loan modification down to sub 3% in rate. We don't know whether it's going to be benefit or not.

It’s one thing if someone absolutely needs a forbearance because they just simply cannot find a way to pay their mortgage. However, he didn’t say that was the case here. He just asked how forbearance will affect him on obtaining future investment properties.

I can pretty much guarantee a future lender is not going to look at it as a big positive if he ends up going with forbearance or getting a loan modification or any sort of loan forgiveness as you suggested.

Best case scenario is he finds a lender who doesn’t penalize him for that, but there certainly isn’t going to be a “huge benefit” when he goes shopping for his next loan and they find out he wasn’t able to make the payments on his current loan or it had to be modified or partially forgiven.

 So I just got off the phone with my lender Bank of America.  They said for my own loan I could get it "Modified" from the current 4.5% rate down to a 2.8% rate.  This sounds pretty good but it would be considered a loan modification.  It's for a loan in California of $700, 000.  That would be a huge savings on my monthly payment.  Now this doesn't sound that bad. 


What's the problem with these modifications?  How wil they be looked at when I refinance my multifamily or other commercial loans?