Credit impact of mortgage forbearance programs

[newlyunemployed]

Hello. I recently learned that I am getting laid off from my job after 25 years and will be seeking temporary (6-12 months) financial relief in all potential areas that will not impact my credit. One place where I thought I’d get some of this relief was with my mortgage payments, but after speaking to a Wells Fargo representative yesterday I’m no longer sure that is the case.

 

It has taken years of hard work to build my credit score up near 800. As of today I have no negative marks at all on my report (all 3 bureaus) and plan to keep it that way, unemployed or not. I’ve never had a late payment on anything and I am hoping to keep it that way. Leading up to this layoff I did my research on mortgage forbearances and my understanding was that I could postpone my payments for a short period without having any negative impact on my credit. However, after speaking to Wells Fargo yesterday I’m worried that if I do enter into a forbearance plan it may hinder me long-term when it comes to Equifax, Experian and TransUnion.

 

The Wells Fargo rep informed me that it would be reported to the credit bureaus that I was taking part in a forbearance program, something that I imagine would definitely hurt me going forward when it comes to future credit, etc. I’m posting here in the hopes that someone who has done this before can enlighten me further on the details, as the rep I spoke to was unable to answer anything beyond the most basic of questions.

 

I’ve worked hard for almost 35 years total and have done my best to be as responsible as possible during that time. It does not seem fair to me that during a tough time such as this — one completely out of my control — that I should be penalized for entering such a program while I seek new employment.

 

Thanks in advance for any advice you can provide!

[MarvBear]

Welcome to CreditBoards.   The mortgage folks may want me to move this to the main credit forum.  I'll wait till Shane takes a look at this.  We all hope your job search goes well.

[hegemony]

8 hours ago, newlyunemployed said:

Hello. I recently learned that I am getting laid off from my job after 25 years and will be seeking temporary (6-12 months) financial relief in all potential areas that will not impact my credit. One place where I thought I’d get some of this relief was with my mortgage payments, but after speaking to a Wells Fargo representative yesterday I’m no longer sure that is the case.

 

It has taken years of hard work to build my credit score up near 800. As of today I have no negative marks at all on my report (all 3 bureaus) and plan to keep it that way, unemployed or not. I’ve never had a late payment on anything and I am hoping to keep it that way. Leading up to this layoff I did my research on mortgage forbearances and my understanding was that I could postpone my payments for a short period without having any negative impact on my credit. However, after speaking to Wells Fargo yesterday I’m worried that if I do enter into a forbearance plan it may hinder me long-term when it comes to Equifax, Experian and TransUnion.

 

The Wells Fargo rep informed me that it would be reported to the credit bureaus that I was taking part in a forbearance program, something that I imagine would definitely hurt me going forward when it comes to future credit, etc. I’m posting here in the hopes that someone who has done this before can enlighten me further on the details, as the rep I spoke to was unable to answer anything beyond the most basic of questions.

 

I’ve worked hard for almost 35 years total and have done my best to be as responsible as possible during that time. It does not seem fair to me that during a tough time such as this — one completely out of my control — that I should be penalized for entering such a program while I seek new employment.

 

Thanks in advance for any advice you can provide!

 

any reporting of being in such a program will not be good to your FICO scores. But it sounds like you have more important things to worry about than FICO scores. You need to do what you can to stay afloat until you land another job. Have you visited the money management subforum? There is a lot of good info on budgeting and cutting expenses. I would focus on cutting elsewhere before I ask for a mortgage forbearance.

 

 

good luck and let us know if you have more questions.

[liverichly]

On 2/13/2023 at 10:00 AM, newlyunemployed said:

Hello. I recently learned that I am getting laid off from my job after 25 years and will be seeking temporary (6-12 months) financial relief in all potential areas that will not impact my credit. One place where I thought I’d get some of this relief was with my mortgage payments, but after speaking to a Wells Fargo representative yesterday I’m no longer sure that is the case.

 

It has taken years of hard work to build my credit score up near 800. As of today I have no negative marks at all on my report (all 3 bureaus) and plan to keep it that way, unemployed or not. I’ve never had a late payment on anything and I am hoping to keep it that way. Leading up to this layoff I did my research on mortgage forbearances and my understanding was that I could postpone my payments for a short period without having any negative impact on my credit. However, after speaking to Wells Fargo yesterday I’m worried that if I do enter into a forbearance plan it may hinder me long-term when it comes to Equifax, Experian and TransUnion.

 

The Wells Fargo rep informed me that it would be reported to the credit bureaus that I was taking part in a forbearance program, something that I imagine would definitely hurt me going forward when it comes to future credit, etc. I’m posting here in the hopes that someone who has done this before can enlighten me further on the details, as the rep I spoke to was unable to answer anything beyond the most basic of questions.

 

I’ve worked hard for almost 35 years total and have done my best to be as responsible as possible during that time. It does not seem fair to me that during a tough time such as this — one completely out of my control — that I should be penalized for entering such a program while I seek new employment.

 

Thanks in advance for any advice you can provide!

 

Sorry for the delay, I clicked on this thread 3x but always got interrupted with that pesky thing called work.  So when lenders were doing COVID relief forbearance and you were current on the mortgage at the time it went into forbearance then there wasn't ever any negative reporting on to the credit bureaus, it just had a notation that it was in forbearance and sometimes the payments were still reported as on time and other lenders just didn't report any monthly activity (YMMV).

 

Outside of the COVID forbearance plans it'll be up to each lender on how they decide to report, but from what I've seen is if you are current at the time you go into forbearance then majority of them do not report you are late each month and will just notate that the account is in forbearance.  It's similar to when entering into a loan modification agreement for financial relief, if you are current and remain current until the forbearance is granted then there aren't monthly late payments added to the report.

In situations where only the forbearance is mentioned on the credit report, without any late payments, I've never seen credit scores suffer.  Keep in mind there are some waiting periods that must be met after you've completed forbearance before you can be eligible to get a new mortgage (6 months of payments post-forbearance is the most stringent requirement I've run into).

 

If you can confirm that Wells Fargo won't report you late then I'd feel pretty confident about your scores not taking a hit.

[frank92555]

I am a little late responding to this but I will cast my comment anyway for anyone else and since no one else spoke up.

 

I was hit hard in the last recession and I have two homes that went forbearance and were modified and are notated on my credit reports. Credit was trashed.

 

I don't know if it is because my loans were already 4-5 years old when I began re-applying for credit in 2016 but this never came up as a factor for me. I am now in great shape again with 800 scores and over 350k credit lines.

 

I also have not heard of anyone having a problem.