Is Mortgage Forbearance A Trap? | Is Mortgage Forbearance Good Or Bad? | What Are The Pros And Cons?

so is this whole mortgage forbearance thing a trap okay is this something that’s actually good for the people or is it just a play by the banks to steal people’s properties okay you know that’s a great question and we’re gonna talk about that and discuss some of the details in today’s training hey everyone it’s Mike Adams and on this channel we empower individuals to achieve freedom through improved financial literacy and business ownership if you are new to the channel make sure to click subscribe and click that boul so that way you get notified on any and all of our future content so in this video guys we’re gonna be discussing is mortgage forbearance a trap and and essentially is it a is it a toy or a trick by the big banks to steal your house okay and you know and there’s a lot of evidence on both sides of it you know obviously there’s some some pros to getting a mortgage forbearance and then there’s also some some pretty significant cons the main Pro around mortgage forbearance is they’re giving you some time write down if you’ve been affected by you know what’s going on in the economy right now and you’re unable to make that mortgage payment and obviously we don’t want to get foreclosed on so by getting the bank to agree to some forbearance time that gives you some breathing room in which you’re not required to make your monthly mortgage payment and they’re not going to you know start filing the papers to foreclose on your property now the big drawback okay in the big the big con of forbearance is that there’s going to be a lump sum okay so let’s say you’re able to get three months of mortgage forbearance so you don’t have to make your mortgage payment for the next three months right but once you have to resume payments okay once that month for okay now we got to resume making payments well now you start making a normal payment here but you’re also going to owe these three months in one bit lump-sum all at the same time okay and so this is gonna create a scenario where essentially you have to make four payments all at once to have satisfied okay the mortgage forbearance agreement and be again totally caught up on your loan okay and now you know some people okay in some scenarios it might be just fine okay maybe you’ve already gotten back to work okay or maybe you know you just dealt with some reduced hours during this crisis and now your hours are back maybe you have overtime now and you can get caught up and get ahead again and then you’ll be able to make that lump sum payment on time and just kind of be done with that mortgage forbearance you’re all caught up with the bank everything is all good but here we get into the whole idea of is this a trap okay because how many people are going to struggle to come up with that lump sum okay think about yourself and your own scenario right now you know could you make four mortgage payments all at once you know even when things were good even go go back to January before everything you know kind of went haywire with our economy you know would you have been able to make four months worth of payments you know and and some of you may have you know if you dip into the emergency fund or maybe you got some assets or reserve somewhere that you could pull from but without pulling from an emergency from I mean who had an extra you know three payments just laying around okay and and most people what we know about the economy is that most people weren’t in position to even cover a five hundred dollar emergency you know if you for most americans it’s like if your car broke down or tires went out and you need a new new vehicle tires five hundred bucks you know chances are you’re gonna go into debt in order to pay for that right so people didn’t have the money before the crisis to make some kind of lump sum payment what makes the banks or the government think that after not working or or being reduced hours or just not working at all you know during this crisis and now let’s say you’re able to get back to work let’s say you’re able to co full steam ahead you’re right back in and again most businesses gonna be like this okay well we know is that some businesses straight-up are not going to be reopening after this crisis that’s gonna be jobs lost some businesses are not going to be at peak operating efficiency imagine running a restaurant or something like that where you know hey you know you know in January you are full every single night of the week you know even once they you lift the you know the lockdown restrictions you know you may still be in a scenario where you know you’re either a do to social distancing and new things are in place you may not be able to fill your restaurant the way that you used to even without restrictions are as many people gonna be going home to eat as there were before all this happened and so for some folks yeah you might have went back to work but is your income right back to where it was you know in some cases it might be in some cases it won’t and so again if that’s the case how are you supposed to come up with this lump sum at the end of four months and what does the bank tell you you know it talks about you know how at the end of the forbearance period it’s like it’s like don’t worry you know if you’re not able to come up with that lump sum don’t you worry because at the end of the forbearance we’ll just kind of have another discussion with you okay and if you’re not able to come with that lump sum we’ll just kind of take a look at things we’ll just kind of review the situation here and we’ll make a decision on what’s what’s what’s what’s next right what’s what’s best for both of us here and and again speaking on behalf of the bank you might voice changes like you know what’s best for the both of us here right and you know the bottom line is this yeah what’s best for the bank is you send them a payment right and if you’re not doing that what do we know about banks guys you know banks are in business to make money and let’s not pretend that banks are just offering these forbearances because they want to this is a requirement from a government that’s that they’re just half they have to do it you know but they don’t necessarily want to you know banks right now are low on reserves banks need that money coming in you know there’s a whole other side of this you know with people not making their mortgage payments you know there are and again not to go too crazy but there are there are bonds that are created in these mortgage tranches that are created in which people invest in these tranches and they get an interest payment they get a dividend on that and if mortgage companies aren’t receiving their payments they’re not able to pay that dividend on the other side and they give for most people they’re like people it’s like okay Michael it’s a tranche and it’s like a lady that has nothing to do with me right but again this is just kind of painting the picture of what the banks might be going through as a lender if those payments are coming in but yet they still going to make these payments here it’s like we really need to get money coming in here so that way this money pays for this this interest of this dividend payment here versus us having to pull it out of our profits okay because again you guys banks are always all about their profits how do they make profits by charging people interest and collecting interest payments okay and so we can’t count on the bank maintaining this goodwill of offering forbearances even when this crisis has concluded so you know what are the options you know if you’re not able to make that lump sum you know either a they’re gonna look at giving you again if you’re still lendable right I think I think that’s gonna be one of the key things when they do their review okay well okay Mike well you didn’t make the lump sum payment so now you’re behind three months okay you know number one you’re in a terrible position right you’re in a terrible negotiating position because you’re already now behind right you made a forbearance agreement that you weren’t able to meet your obligation on so you’re the one that’s behind now and not in a position of strength to negotiate if you have not started working again or maybe your business completely shut down and you’re totally out of work you’re the bit the bank may deem you as unlivable right it’s like hey you know you were qualified you know when you originally got the mortgage but now you are not qualified and again guys if things have significantly changed and you’re just no longer in a position to be quote-unquote lendable the bank’s like look you know we could never write you a loan right now based on your current scenario we can’t really modify the terms here you know we might just look to foreclose at our earliest availability to do so and in which case you would potentially lose you know any equity that you actually have in the property because you’re getting the boot they’re taking the property over there are gonna look to sell it your auction it off to try to pay back the mortgage that’s actually on that property and as we know with a foreclosure that is going to put extreme damage it’s gonna be extreme damage to your credit making it even harder for you to get a loan for many many years after this so you know is it a trap okay I would say that it is a trap especially for those that you are just didn’t quite see that they’re gonna need this lump sum at the end of the forbearance I think this is where some people are gonna get caught up and in any economy there’s always gonna be some winners and there’s always gonna be some losers there are gonna be some people that come out of forbearance and they’re fine they’re able to get caught up they’re able to make that lump sum and it’s all gravy they’re ever they just move on and the forbearance period was a good thing for that person but for many others and I’m talking potentially millions of people you know they may not be able to make that lump sum and at that point they’re gonna be at the mercy of the bank and as well your credit could get ran through the wringer if you are forced into foreclosure because you’re not able to get caught up after your forbearance so the number one thing that I would just throw out there is if you are able to make your payment’s okay and and and if you’re able to just keep on making your payment’s make your payments right don’t take the forbearance okay unless you absolutely need to don’t just take it just to take it and then all of a sudden you know and you’re thinking okay I’ve been working just fine you know my bank gave me a forbearance I’m just gonna take it just to take it and I’ll just kind of lump-sum them and get caught up but it’s nice to not pay now and you have that kind of an attitude and then all of a sudden something happens to your job and now you’re not able to make that lump sum and oops you know now now you’re in a spot right where you’re at the mercy of the bank so again if you don’t need the forbearance guys don’t take it if you do have to take the forbearance okay if you’re able to send in some of those payments right to where that lump sum doesn’t have to be as big at the end of the forbearance period guys do it because the smaller the lump sum let’s do the easier it will be on you to actually fulfill on your obligation of the forbearance but to me guys this just feels like a big time trap I think the government and the big banks knew that most people again you know people are nervous you know people are unsettled and uncertain about what they’re gonna need their funds form and by throwing forbearances at people they knew that most people especially in in desperate scenarios would take the forbearance but unfortunately just like the last time the market crashed a lot of really good hard-working people ended up losing their properties you know really you know I had no fault of their own I mean you know back in oh wait it was because they were in a bad loan you know that really shouldn’t have been written but the bottom line is now I mean do too you know at no fault of your own you could end up being a situation where you’re taking this forbearance and not able to get caught up and end up losing your property so again those are my thoughts on it guys now I’ll be curious to hear what you guys think about mortgage forbearances and if you think mortgage forbearance is a trap that’s being set up by the big banks and the government to steal your property okay if you have an opinion on this make sure to put it in the comments below and if you got value out of this discussion make sure to give this video a like it greatly I greatly appreciate that and definitely helps us with the YouTube algorithm and I will see you in the next training [Music] you

13 thoughts on “Is Mortgage Forbearance A Trap? | Is Mortgage Forbearance Good Or Bad? | What Are The Pros And Cons?

  1. @thinkwealthywithmikeadams …..Hey mike I have a question. Can you explain velocity banking while also paying 2 payments on your loan a month. For example, you have a 200k loan and you have a line of credit of 10k and your monthly payment on loan is 1k but instead of paying 1k at the end of the month you pay 500 each paycheck along with velocity banking help reduce debt even more? Thanks for all the information

  2. Great video! I was going to use this opportunity to create a larger chunk payment because they told me it was just a pause button but when the letter came out it said forbearance so I knew it was a trick play trap and it wasn't a pause button at all.

  3. A forebearance is practically holding your breath as you jump from an airplane until landing in the middle of the ocean!

  4. Found this to be a bit repetitive. Your main point is to not take forbearance unless absolutely necessary.
    Was hoping that you would cover "accrued interest" as a potential trap. Depending on duration and T+C of forbearance, accrued interest can be substantial, especially if the mortgage was initiated just a few years ago.

  5. Wellsfargo is giving the option to add the payment to the backend of the loan and FHA is turning the forbearance payments into a loan that’s % free. Like a second mortgage.

  6. It is! My finance company told me I qualify but would have to make up the 3 payments in 6 months! Duh. Why would anyone do that?? However, if the new bill for forbearance goes through, that would automatically put the year to the back of the loan. At that point, I can semi-velocity bank by sending that payment directly to my principal for a year !! Fingers crossed-come on Senate!

  7. In velocity banking, after the chunk payment, do you still make your mortgage payment for that month?

  8. I have a question. My personal resident has 150,000 3.75 % for 13 more years. Also I have a rental property with 71,000 at 6.75% with 13 more years.
    Is it better to re-fi and get cash to payoff the rental property. Then use the monthly P& i on the rental to pay down the personal residence. The total closing cost to re-fi is 7,249 at 3.75%
    for 30 years . Or would it be better to just make extra monthly payments as you suggested?

  9. I find it highly suspicious that banks are offering Forbearances, but almost nobody is talking about Deferments. Deferment is much better and is totally painless. Several years ago, I went through a financial hardship and called my student loan provider and was able to get 3 or 4 payments deferred with no penalty. That essentially put my loan on hold for 4 months to allow me the time to make whatever job change I needed to.

  10. Mike. Based on your $5000 in and $3000 out model you covered in another video, what would be the difference if you just paid the $2000 difference directly from your checking account to the principal without using a line of credit? Sorry if you covered that already and I missed it.

  11. What about the other option? Deferral. If this is "tacked" onto the end of the loan, then that would require a loan modification and then you'll be told "Oh no – you can't re-mortgage, you are high risk" … you went into forbearance.

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