Seller Financing mortgage forbearance?

Question

Does anyone believe or know whether investors who use seller financing will be able to take advantage of any forbearance of mortgage?  I'm assuming not as that would need to be agreed upon with the individual note-holder, but thought I'd ask since there's so much talk about mortgage relief/forbearance for landlords during the coronavirus pandemic.

*As a side note, my husband and I are not anticipating needing to use mortgage relief for any of our properties, but as a back up plan, we'd like to be aware of our options.  And yes, we have reserves.

Thanks in advance :)

Tracy Z. Rewey · Answer

You are welcome.  Stay safe and healthy!

Scott McElhaney · Answer

I continue to see and hear about folks looking for some sort of government mandate in order to get mortgage relief help.  This is simply not necessary.  Just pick up the phone and call your lender and ask "What Mortgage Relief Programs is your bank rolling out?"  Most have or are rolling out programs very fast.  I've been dealing with our lenders, both large and small, and all have been extremely accommodating.  On the private lending side, I would expect that private or hard-money lenders should be equally accommodating by offering either an Interest Only (IO) period or a deferral period....BUT you have to be candid with them as to your situation and state what you're specifically asking for in terms of assistance.

Christine Mulkins · Answer

Thanks Tracy! I appreciate your insight and kind words :)

Tracy Z. Rewey · Answer

Hello @Christine Mulkins That is actually a great question!  You often have so many more options with a private seller financed note over a bank loan as you get to work out an agreement one on one with the note holder/seller.  One option is negotiate a Modification of the Note terms.  This could be reduced payments for a time, reduced interest rate, skipped payments (extending the amortization) or any other agreement that works for both of you.  By entering into an agreed Modification BEFORE going delinquent you never have to get to the formal forbearance stage.  Sadly with banks they often make you get delinquent before they will talk to you about forbearance.  That is different with sellers that took back financing.

@Aaron K. mentioned messing up your credit which can be true with bank financing.  But if you modify the note terms and always stay in compliance then you won't be in default. Also not all sellers report to credit bureaus.  If you make your monthly payment through a third party servicing company that then disburses to the seller it is possible they do report (some but not all do), but if you pay directly to the seller then that is unlikely.

I have worked with seller financing for 30 years and I always appreciate a buyer that contacts me to discuss options before going delinquent.  You are smart to think about your options ahead of time!

Christine Mulkins · Answer

Thanks. Appreciate the information.  Sounds like my assumption was correct then - need to talk to note holder to make such arrangement, if need be.  Dumb question on my part.

Guifre Mora · Answer

Lets first define for all the readers what is a what is a Mortgage Forbearance Agreement by first defining what a mortgage is. In simple terms, a mortgage is a loan agreement or contract with a Bank, Lender, Private Lender or Investor, wherein the borrower receives cash upfront then makes payments over a set time span until he pays back the lender in full.When a borrower is delinquent the lender agrees not to exercise its legal right to foreclose on a mortgage and the borrower agrees to a mortgage plan that will, over a certain time period, bring the borrower current on his or her payments. This new agreement is a Mortgage Forbearance Agreement.

It is up to the legal holder (AKA Bank, Lender, Private Lender or Investor) of the agreement (AKA mortgage) to allow the borrower to enter into a Forbearance Agreement.

So if a borrower is having financial hardship they must approach their lender directly and discuss their options.

Aaron K. · Answer

Nope, there is no law mandating it, the only forebearance offered to my knowledge is by the lenders who have voluntarily agreed to it.  However depending on locality there may be moratoriums on evictions/ foreclosures, however I wouldn't advise that as it will likely mess up your credit.  Advice to anyone out there don't trip over dollars to pick up pennies.