Will taking COVID-19 forebearance now impact lending in future

I have 2 rental properties with mortgages on them. Both are in NYC. One rental property is up for renewal in (currently occupied) and the other has a tenant who was always behind 1-2 months before COVID-19. Once NYC got shutdown, I was seriously worried about cashflow and whether my reserves (personal savings) were going to get used up fairly quickly. I contacted both of my lenders and they both offered me a similar program. 3 months forebearance. No Principal & Interest payments for the next 3 months. Now the lenders are calling and asking if I would like to continue my taking forbearance. I would because if I’m not paying my mortgages, I will have adequate capital for my renovation project.

My question is, 2 years from now will I get dinged when trying to take out a mortgage loan for an investment property? I know COVID-related temporary modifications DO NOT impact your FICO score, but are lenders taking note of COVID- modifications.

When I go to take out a loan and I qualify for say the lowest rate, will banks tack on 25 basis points b/c I took a COVID-modification?

decoart

in General Discussion 5 years and 2 months ago

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IronBalls | 5 years and 2 months ago

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I asked my banker friend today. He said that his bank wouldn’t hold it against you as long as you were no longer in forbearance when you applied for the mortgage. He commented that some folks in forebearance want to refinance those same mortgages, and they won’t do it because they aren’t current with their payments. He also mentioned that he believed the Cares Act specifically disallowed banks and creditors from turning down loans because of past forbearance.

decoart | 5 years and 2 months ago

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Spoke with a wall street friend about this. According to the research people at his firm, it will definitely hurt LLP (loan level pricing). I am going to repay the entire forbearance amount ASAP. I’m going to be at the bank looking for a loan in 2 years. Thanks guys.

krobertson

in General Discussion 5 years and 2 months ago

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I was told it does. Spoke with my mortgage banker recently about refinancing to a lower rate and they specifically asked if I had taken a recent forbearance on my existing loan. They said if I did, it would add some ridiculous amount of points the to refinancing costs for the same rate.. (don’t recall exactly, something like 5-7 points). And this was required for all conforming freddie/fannie loans. Don’t know if this still applies 2 years out.

yudashasom | 5 years and 2 months ago

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YES – it will. I said this from day one when someone asked early on in the shutdown about this. Your credit score will not be hurt – but it will be noted on your credit report. It will hurt you long term. Lenders will see this for the next 7 years.

IronBalls | 5 years and 2 months ago

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I’m not sure, but I will ask a banker friend this week and report back. I ran credit recently on a prospective tenant and the report showed that he had covid related credit card forbearance. No idea if it affected his FICO score, but it did show up the report, so it is a factor potential lenders may consider.