Banks often temporarily suspend a homeowner's loan payments in the wake of a disaster, but sometimes the assistance can backfire.
DEAR DAVE: My brother lives in Tennessee, and his home was badly damaged by the tornado that struck Nashville last month. His lender has agreed to waive his monthly mortgage payments for the next 90 days so he can have some extra cash to begin making repairs. Will this affect his credit score?
ANSWER: It shouldn't, though he should take a few steps to make sure that it doesn't.
Lenders often offer mortgage forbearance in the wake of a major disaster, such as tornado storms, blizzards, hurricanes or floods. The forbearance period usually lasts for 60 or 90 days, but banks will sometimes offer longer timelines or agree to renew the plan when the initial period is over.
Guidelines issued by the Federal Housing Administration and mortgage giants Fannie Mae and Freddie Mac clearly state that banks and loan servicing companies shouldn't report borrowers who are using disaster forbearance or similar programs as delinquent to the credit bureaus.
Trouble is, banks and loan servicing companies aren't perfect. For example, the lender or the firm that processes the monthly payments may promise temporary debt relief but then fail to update its files. Or, it may be unclear when the mortgage payments are to resume.
Either way, the borrower gets reported as delinquent and their credit score takes a hit.
To avoid such a problem, your brother should get the forbearance agreement in writing and fully understand its terms.
He should also check his credit report often — perhaps as often as once a month, after the first mortgage payment is skipped according to the terms of the forbearance — to make sure that he hasn't wrongly been reported as delinquent.
All consumers are entitled to one free credit report from each of the nation's three largest credit bureaus every 12 months. The only federally authorized website to get the free reports is https://ift.tt/o2j1vQ.
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REAL ESTATE TRIVIA: An average of 1,253 tornadoes occur in the U.S. each year, according to the National Oceanic and Atmospheric Administration. That's the highest level of activity in the world.
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DEAR DAVE: I recently moved to Boston, and the traffic congestion here is just plain awful. I'm curious: How much time do Americans waste sitting in traffic?
ANSWER: It depends on where the commuter lives, the quality of the local transit system and other factors. But according to a new study by INRIX, a transportation analytics firm, the typical American spends 99 hours a year worth $1,377 in lost pay stuck in traffic jams.
That helps to explain why developers in many cities across the nation are focusing on new or rehab projects in their respective downtowns or other areas near major job centers.
Sorry to inform you that your new hometown of Boston is considered the most congested city in the nation. The average Bostonian wastes 149 hours each year in traffic jams, INRIX reports, equal to a little more than six 24-hour days
Chicago had the second-highest traffic congestion, with the average driver stuck in his car seat for 145 hours each year. The Windy City was followed by Philadelphia (142 hours), New York City (140) and Washington, D.C. (124).
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DEAR DAVE: We have always got a monthly mortgage statement 10 days before the payment is due, and we have always mailed the payment immediately. Last month, though, we never got the statement and subsequently failed to get our payment out before the deadline. Now the bank wants to charge us a $122 late fee. Is this legal, considering that it's the bank's fault that we weren't notified that the payment was due?
ANSWER: Sorry, but the lender has the right to charge a late fee even though you didn't receive your usual notice that the monthly payment was due.
Every mortgage contract includes a provision that allows the lender to charge a penalty if a payment isn't received by its due date. But the contracts rarely require the bank to send out a monthly statement, although some do so as a courtesy to their borrowers.
Several lenders over the past few years have stopped mailing out paper statements to cut costs, while others are relying solely on the internet to send out monthly reminders.
Your letter suggests that you have a good payment history, so you should contact your bank's customer service department immediately and ask if it will remove last month's late payment from your record and waive the $122 late fee.
Many lenders will provide a one-time waiver for customers who have solid payment records, but borrowers with a spotty payment history can't expect such a favor.
Our booklet "Refinancing the Right Way" can help you take advantage of some of the lowest mortgage rates in history. For a copy, send $4 and a self-addressed, stamped envelope to D. Myers/Refi, P.O. Box 4405, Culver City, CA 90231-4405. Net proceeds go to the American Red Cross.
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April 05, 2020 at 05:02PM
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DAVID W. MYERS: Mortgage forbearance may hurt credit score if not properly handled - Sarasota Herald-Tribune
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