With the economic chaos brought about by COVID-19 I have had a number of homeowners tell me their banks will allow them to delay payments for 3 months, with some banks requiring payment in full on the 4th month, and others allowing the seller to pay off the 3 months at the end of the loan or when the home is sold.  While this may be the only recourse to save your home, it does come with some negative "side-effects".

Unfortunately, there is a significant amount of misinformation regarding Payment Forbearance related to the CARES Act and the impact on homeowners. Since the CARES Act prohibits Lenders from reporting Late Payments to the Credit Reporting Agencies many people are operating under the assumption they can just skip making payments without any negative repercussions. What started as Mortgage Payment relief has spread to every type of credit. We are seeing prospective Buyers entering Payment Forbearance plans on every type of credit Car Loans, Installment Loans and Credit Cards. Regardless of what the Government intends you cannot stop making payments on Credit Accounts without it hurting you!

Forbearance basically means you cannot pay on your debt. That is exactly how a lender will see it. And that information will be used when considering your next loan. While a creditor is prohibited from reporting the payment to the credit bureau, they will list it as either "Forbearance", "deference", or "modified", which will make it very difficult for you to obtain a new line of credit.

Regardless of what the Government says, going into a forbearance will hurt you. It is best to consult with a financial advisor to determine if this is the best course of action.