Forbearance under the CARES Act has been the biggest lifelines for homeowners during the pandemic, which left them with some cash for emergencies.According to the results of a survey by Credit Karma many people who went into forbearance still remained stressed about getting and staying on track with mortgage payments.According to the Mortgage Bankers Association as of April 25, 2021 close to 2.2 million homeowners had entered forbearance plans.More than 4 million U.S. mortgages were in forbearance in May 2020.Of those who were in forbearance, 59% said if they were able to delay their mortgage payments then they would be financially stable, and 62% felt stressed about the payments that they would need to make in the future.While in forbearance, 34% used the money that would have gone toward their mortgage for essentials like groceries, medical needs, utilities, and additional expenses faced during the pandemic, as the homeschooling equipment and caring for additional family members.About 32% put the money toward an emergency fund or general savings.
And 21% used the cash to pay down debts like student loans or credit cards.The balance 13% said they didn’t have any extra money, even while they were in forbearance.Even if forbearance allowed people to stay in their homes, and saved the money for necessities like groceries, medical attention or even to pay down debts.But it comes at a cost because, at the end of your forbearance period, you still will have to pay it back.Other understanding from the survey -:Many want to own homesClose to 30% of respondents were considering a home purchase in a year’s time.
And out of the 70% who weren’t looking for a home in the next 12 months, 2% said they’ll never want to buy a home.Lack of financial literacyIn regards to understanding two basic terms related to homeownership, only 54% of respondents choose the right answer about home equity.62% responded correctly to identifying the meaning of home value.It was surprising, of people who had tapped into their home equity in the last 12 months, only 45% were aware of the correct definitions of home equity and home value which is an indicator that people are getting financial products without fully understanding it.84% were aware that it’s possible to leverage home equity to access cash.Andy Taylor, general manager for Credit Karma Home said, that the first step to getting forbearance is talking to your mortgage servicer and knowing about its options.And if the mortgage servicer is not the same as the financial institution of your original mortgage, then customers need to make sure they are talking to the correct party.A customer should also know who is backing their mortgage.
If the mortgage is backed by Fannie Mae, Freddie Mac, or the federal government, then additional help will be.Depending on the type of loan the forbearance can be different.
Taylor urges people to be sure to understand what they will owe when forbearance ends.One needs to know that the interest continues to accrue even on the paused or reduced amounts.Taylor says since the whole process can be overwhelming, seek professional help.The Consumer Financial Protection Bureau has created a tool to help people to find housing counselors who are approved by the Department of Housing and Urban Development.Reference Source: USA Todayhttps://www.compareclosing.com/mortgagenews/where-did-the-forbearance-money-go/
