COVID-19 has affected Georgians in many different ways. As businesses and governments shifted into shutdown, many started to wonder how they were going to pay their bills, rent and mortgages. As more and more segments of the economy shut down jobs were lost at record levels, people panicked and the federal government stepped in to the rescue with the CARES Act.
As part of the CARES Act passed by Congress, mortgage servicers are required to offer mortgage forbearance to consumers affected by the pandemic by either putting a pause on mortgage payments or reducing payments for short period of time. This sounds good and feels good. But what they did not deal with is a uniform process for borrowers to make up missed payments nor how missed payments to the investors who purchased the mortgages would put a huge squeeze on the mortgage market– pushing it to the brink of disaster and ultimately harming consumers.
Another devil in the details of the CARES forebearance regulation is mortgage servicers’ and payment processors’ requirement to report mortgages in (or previously in) forbearance as “current” and missed payments not shown as “late.” The idea behind this is to protect the consumer from derogatory information being reported, but the credit bureaus are using a loophole, or really just lack of industry knowledge, in the regs to show missed payments. This will seriously damage anyone’s ability to refinance or purchase a home for years after a forbearance period ends and something that is not well communicated.
Credit bureaus are following the law to the letter to show that mortgages are current, but they are now using the comments section in an account reference to report a mortgage is in forbearance and how many days the payments are behind. Obviously the credit bureaus must have a way to appease their clients (aka creditors) and they recognize the need to differentiate between people who found a way to pay their mortgages through this unfortunate and trying time and the ones who did not and chose forebearance.
Rosser Southerland of Marietta occasionally writes for InsiderAdvantage Georgia.
