Coronavirus Pandemic|Cares Act Mortgage Forbearance|How a Loan Modification Could Affect Your Credit

So now let's get into talking about. Okay, so she's going to be coming on in a second, and then we'll kind of get into deferring payments. So I just kind of want to go over some of the things that have been going on. So some of the things that have been coming out is, you know, Fannie Mae, Freddie Mac, and the government. Just everything has been offering opportunities and relief for people who've been affected by this whole Covid situation and. And.

Allowing them to be able to defer their payments. Landlords are able to now defer their payments. You know, there's just a lot of people who. It's really affecting, like, the hospitality industry heavily. You know, people who are in customer service, people who are in restaurant services, people who are in travel services. But it's allowing some relief for them to be able to.

Defer their payments, maybe push them back to the end of the loan, or maybe defer them for six months or three months or 12 months. And so TJ is someone who works with clients who are having trouble with making their payments, and so people who are facing foreclosure or people who have lost their job. And so she has created a workbook, and she assists with the paperwork, helping people understand how to complete it, understanding the psychology about completing the paperwork itself. So we were talking today, and she was asking me my perspective on whether or not people should defer or not to defer. She has a. We have. We have different, you know, perspectives on that in terms. But they're still complimentary. So I think that it's important for us to talk. So I am going to let her in. I want you guys to all welcome TJ.

So let's see. Let's see if I got this right.

Hey.

Hey. How y' all doing? Good.

So I was trying to. I have been trying to get on, you know, with the Facebook, and it just. I mean, it just didn't work.

I get it. It was. It was acting wonky with me, too. I couldn't do it on my. On my laptop. But you look cute, girl. You got your lipstick on. You did something that had. And I did, too.

So, yes, I had to do something to my head now.

Absolutely.

Had to put on something, make you feel good. You know, every now and then you're sitting in the house, you still have to feel something.

Absolutely. Look like somebody sitting there in that robe all day. Yeah.

And I work from home anyway, a lot, so, you know, this is nothing new for me. I know a lot of people. It's Been difficult. But I love working from home or my office. I have a whole office, you know, set up with everything like I would in my own office that I have in the Galleria. So it's been kind of cool for me. So.

And I'm learning that I like it. I really do. I get a whole lot more done. I seem to work more than I did previously, but I'm cool with it.

Oh, yeah. I always work more because. Because I've always had one. Even when I left the office, I was at home working. So, yeah, I mean, I hope that a lot of people are experiencing that. And one good thing that I think that's coming out of all of this is the fact there are a lot more companies who are understanding that people really can work remotely. Not everyone can't work remotely. Like, it's not for everyone.

Right.

But there are a lot of people who are just as productive, if not more working, if not more, you know, because they're not frustrated being in traffic when they get to work.

Yeah, absolutely.

They get on and are a lot more productive. So let's talk about what we were talking about before. I was telling people that I just went over a few different changes, you know, from fha, but the pros and cons of, you know, deferring your payments. Right. I know you were interested in my thoughts, and I'm interested in yours, and I think that it's an important conversation for people to have.

Okay. So my opinion is that there has never been a better time for African Americans. We're always behind. I'm a single mom, you know, little girl needs glasses, the little girl needs braces. All of that stuff comes out of my what? My savings account. So From a statistical standpoint, 78% of Americans live paycheck to paycheck.

One in four can't afford a $400.

Emergency in a month without it sending them doggone near into bankruptcy. That's big. So now could be our time to save money if we're going to do what we're supposed to do with the money that we save and defer the loan. Now, I only recommend that you defer a loan under two very strict circumstances. One, if your lender is going to put those payments at the back end of your loan, okay? That's number one. If you'll have a lump sum after three months or after a certain period of time, it's not worth it. Continue paying your mortgage. However, if they put it at the back end of the loan, then let's say your mortgage is $1,000 a month. That's three months payments for 90 days and you'll save, have a savings of $3,000. 3,000 is better than zero. Don't spend that money on Gucci bags. Don't spend it on, you know, crazy stuff. Let that be your savings. That's not trip money. It's not. That's for your savings. That's if something important happens. The second thing is.

I've been told, we were all told that evictions, foreclosures, late payments will not go on your credit. Just recently I found out, though, that it is possible for them to put a code, a disaster code on your credit report to say that there was an event during the catastrophe. And that code would mean basically that you weren't able to make payments during that time. So how will that affect your credit score? Have you ever seen that on mortgage documents for people who've been in disaster areas during Harvey or anything else?

So Harvey was a little bit different. Okay, no, but people also didn't have the same relief when it came time to.

Exactly.

They weren't given the option of deferring. So there are a lot of people who did get late payments and different things like that on their credit and went into collections and different things like that. But when that happened and when it was due to Harvey, it was just a different approach. It was so much more isolated because. Because it was just basically here in Houston. It wasn't all around the nation. And when they've had different disasters, they've been isolated to different areas. So although there are different programs, like During Harvey, with FHA loans, you could get.

0% down payment for up to a year after. So there was a totally different FHA loan program for people who were affected by Harvey to help them buy. But if they had issues, then, you know, they had to go through the typical, you know, explanations and make sure they show proof. Like if they had a late payment on their car, but they lost their car in Harvey, they would have to supply paperwork to justify what happened. Was it a total loss through a flood? And, you know, different things like that that were allowed. And as long as AUS accepted it, then, you know, we still could make it work for them. Okay, now post Harvey a year, two years, you got collections and charge offs and anything else. I mean, it was treated no different than it is today.

Yeah. And I mean, if you think about it. So let's say the government does all of this. They defer payments for up to a year. You can put those payments at the back End of your loan, you keep going.

I, I need to get the charger for my computer.

Okay. Okay. Even, even if they do do this, you know, a lot of people won't be back in on their feet within 12 months to a year. It's going to take a lot longer. I mean, if you. We don't know what's going to happen to the job market. There have been 6.6 million claims for unemployment. That's a whole bunch of people losing their jobs. I don't know what kind of job you have, but you got to think, is your job in jeopardy? Do you have enough savings? What's best for your household at this time? Regarding the deferment.

I'm not here to tell people what to do, to be honest with you. I want to give you the information and I want you to ask your lender the proper questions. The proper questions are how are you going to report this on my credit? Will it be reported as a late, Will it be reported as a disaster code? What will that look like? And will you place those payments at the back end of my loan? Now? So several lenders are saying that basically they don't know. This isn't a system that they've dealt with before either. So right now, when you call them, what they know is okay, right now the program for some lenders is that they're going to give you 90 days to pay. After the 90 days, there will be a balloon. If you can't pay it at that time, then you request another type of.

Right where they may put it at the back end of the loan. But that's a real black hole, if you know what I mean. That's an unknown. So, yeah, now I defer it. I hold on to that money. That's why you got to hold on to it because you don't know if they will at the end of the day, put it at the back end of the loan. If they're telling you, you know, that option is not available today and some, for some lenders it's not available today. So you have to be sure to make that call for yourself. Is it worth it? And are you going to really save the money?

So, and that's a good perspective and that definitely is very interesting, like we were talking about a little earlier. And here's my perspective. My perspective is that if you can afford to make your payments, then you should make your payments.

If you haven't lost your job, if you have, if you haven't lost your job and your budget and everything hasn't been affected at this point. Your industry is safe. You're an essential business. Don't take the opportunity that some people really need away from them in an effort to get over. You know what I mean? And unfortunately, what happens is that there are people who, in any disaster, it happened during Harvey. There were people who applied for SBA loans and assistance that really didn't have anything happen to them. And it made it more difficult for people who were truly homeless in order to obtain the benefits that were designed for them. You know what I'm saying? So if you're in this COVID 19 environment right now and you aren't financially affected, and being financially affected doesn't mean that, hey, I can't pay to get my nails done or my hair done, that those are all optional things anyway.

Right?

You can make your payments, your kids are safe. You know, you can make your car payments, your minimum credit card payments, and you can afford it. Make your payments because you'll appreciate it when you really, really need the help that the assistance is available. Now, if you've lost your job and you know you are having trouble, I agree with you. This is a good time for you to get the assistance while you can get the assistance, as long as you do what we both said you actually do, what you're supposed to do with the time frame. Now, as a lender, we don't know. There's so much that's changing everything every day.

Yeah, Right.

Like, I have a client that literally I qualified last week who. Who is under contract, and he qualifies for down payment assistance, but he no longer qualifies for down payment assistance.

Why?

Because his minimum credit score was well over what that down payment assistance program asked for last Friday, but as of today, it's increased by 80 points. People can't just create 80 points, right?

Yeah. Yeah. That's impossible.

And he's only 30 points away. Right. Even 30 points over a day or two days or three days is not an easy thing to do. And unfortunately, there was no way for me to know that. Yeah, there was absolutely, positively no way for me to know that. Last week it was 600 and today it's 680.

Wow.

And so he's in a position. But he was in a position where he had money, he had some savings he actually could pay for his closing cost agent was extremely proactive with getting him seller credit and concessions.

Yeah.

And I was able to get him a rate that allowed him to be able to afford his payment. It's really low. And he is also getting A lender credit to help offset some of those costs. So, so he doesn't have to come up with as much money.

Right.

But this is just an example of the things that people need to be prepared for. Like there was someone in the comments before Kristen who asked, you know, what can new buyers be thinking about during this time? And I told her that's really loaded. But because there's so many ways you go with that. It's a question though.

Yeah.

But one of the things I did say was to understand that gone are the days where you're, at least for right now, where you're going to be able to buy a house with no money down, no money in the bank and still close in 21 days with nothing in your pocket but a dollar.

Wow.

Like, you're going to need to have better credit. You're going to need to have a budget. You're going to need to be thinking about being on the lower end of your debt to income ratio. You can't expect to buy a house with a 55% back in ratio anymore. You're going to need to start thinking about your budget and making sure you stay like under 50% or as well under 50 as you need. So when you're talking about deferring payments, the thing is, is that it's actually your servicer that you should be talking to. Because if you're under contract or you're talking to me as your loan officer, I don't service your loan. That goes to a totally different department. There are totally different guidelines that FHA, Fannie Mae, VA, USDA, Freddie Mac actually have with the servicing department. The servicing department is who you make your payments to. You don't actually make your payments to the division where that originated the loans.

Let me say this real, let me say this real quick. So the person who services the organization who services your loan is not necessarily the investor who owns the loan. So sometimes they have to. The servicer may not have, say for instance, you purchase your house and bank of America was your lender at the time. Bank of America sells that loan to another servicer. Let's say they sell it to Citigroup or somebody. Now Citigroup is the owner of that mortgage. That actual note, however, bank of America still services the mortgage. There is a difference. So bank of America can't make decisions for Citigroup. They have to make the, they have to get approval from Citigroup in order to give you certain options. So just because bank of America offers certain options to their clients and, and you Call in. That option may not be available to you because they've sold your mortgage or your mortgage note. So it's just, I just wanted to know.

And that goes into what I was going to say. So we're on the same page about that, which is why people ought to really have to pay attention to the documentation that comes to them.

Yeah.

The other thing about that is like this, like she said, like your underlying investor is the person who actually owns the note. That can also be someone very different than who originated that loan.

Yes.

So you could have gone into say XYZ Mortgage Company and they were the ones who originated the loan. That's who you close with. That's the loan officer you talked with with ABC Mortgage Company. But the investor they locked your loan with could have been Citigroup or Wells Fargo or, or bank of America or Flagstar. That's your underlying investor that TJ is referring to, that you're talking about. And they do, they have their own set of rules and guidelines. But then the type alone you have also matters because even though you know Citigroup or Bank of America actually owns the note, if it's an FHA loan, they have to treat it different. If it's a USDA loan, they have to treat it different. And all of those entities are rapidly changing the guidance guidelines and what those companies can offer in terms of the relief they get from offering you relief.

Yeah.

So it's, it's, it's one of those things where it's so helpful and I think it's so great that there are people out there like that you do what you do in terms of assisting people with that information.

Thank you.

And I think it's helpful or it would be good for you to really kind of go into. I know we're talking about deferring payments. Right. I think it's really important for people to understand because the key thing with the conversation with deferring payments is one, we're in an environment where things are changing. Right. So it's important for people to know who to talk to, what kind of professionals are keeping up with the rapid changes so that they can have the most up to date information. Because Google's not always your friend because it doesn't always give you the right information.

Right? Yeah.

To, to understand that deferring your payments is really going to depend on your situation. If you're financially able to afford your payments, you haven't lost your job, then think about, you know, just making your payments on time. If you're someone who Lost your job or looking at or might be in a situation, you know, you don't have savings, you don't, you know that you don't have what you need. Think about whether or not deferring is going to be a good option for you, but only after you do the things that you told them to do.

Yeah.

You know, which. We're calling your servicer, calling and asking the questions that you asked. And I think it'll be helpful for people to hear again, like what you recommend that they do.

Okay.

So again, the two questions that are important to ask your servicer when you call them as one. Will you put the suspended payments at the back end of my loan? Suspended, deferred. Those words can be used interchangeably. Will those payments go at the back end of my loan or are you expecting a balloon payment after this time period is over? After the deferment period, a lot of people are using 90 days. So what will happen after those 90 days are over? You need to know that before you get off the phone. Don't feel rushed to make a decision. You can call these people back tomorrow, find out what your options are, and then call them back. If they say that they can't put it at the back end of the loan, you really need to consider, well, can I continue making my payment if they can't do that? Because then you'll owe that payment. I also want to state that.

Your taxes and insurance will not go to the back end of your loan. Your escrow will be short at the end of the year, so you must save the money to cover that escrow shortage. The second question that you'll ask your servicer is whether, how will they, how will they report this on your credit report? Will it be reported as a negative or will it be reported under, quote, unquote, a disaster code? Now, the disaster code is not supposed to be a negative, but, you know, maybe lenders will look at it as such. I really don't know. I mean, I haven't seen the disaster codes before, but this is something that I'm, I'm hearing from other industry professionals is that there are, they are talking about instituting a disaster code just to say, well, these people were able to maintain their finances and these people weren't. So it's another way to, you know, designate you as somebody who lost your job or wasn't able to make your mortgage payments, just like, you know, other people were able to. And those are things to think about. If there are any black holes, I mean, it's right now There are a lot of black holes. There are a lot of people who can't answer all of your questions. I'm getting told that they're saying, well, for now, we're going to defer your payments 90 days. At the end of that 90 days, we'll reassess the situation, then figure out whether or not we'll put it at the back end of the loan or will it be doing a lump sum at that time. What is that going to look like, though? Are you going to ask me to fill out a packet of 200 plus pages and ask for, you know, my mother's last name? You know, you're right. And proof, what is that going to look like?

And will you still have to pay it? So even if, whatever you do, keep the money. I mean, even if you do it, even if you do do a deferment, don't spend the money, because you might have to pay that back much sooner than you anticipate.

So not to mention the fact that, I mean, there are some things that could also happen. So it might be like if you have a payment of $1,000 a month and, you know, they defer for the 90 days, you may have to pay the $3,000 at one time, or you might be able to put it on the back of the loan, or you might have a specific period of time where that $3,000 gets brought, broken up, and then it gets added to your payment every month.

Increasing your monthly payment.

Yes, increasing your monthly payment until whatever you deferred is paid back.

And that feels so much worse to me. Increasing that monthly is like the worst thing, you know, because that, that's a hard hit to your, your, your household, in my personal opinion. I mean, I would prefer put it at the back end or pay the whole thing off or just don't do it.

Yeah. Now, one thing I do want to encourage people is that I want you, I want everyone to understand too, that if you. Things happen all the time. Right. You know, people lose their jobs all the time. But what's going on right now is that whole industries, like I said, this is really affecting the hospitality and the travel industry. Like in the service industry.

Absolutely.

In my opinion, more so than anything else. Like, I'm an essential business. You're an essential business. My loans aren't going away. I actually have more loan applications for people who want to refinance and people who want to buy still than I had before because rates are starting to go back down. You know, there's always people who are, who will Be able to buy.

Right.

But for people who are in a position where they might be losing their job, it's helpful for people who are looking to buy to start thinking about your budget. Start thinking about how much. Start proactively making sure that if there is something that happens later on down the line that you're. That you're protecting yourself. So start saving if you're not saving, keep saving. If you've been saving.

Yeah.

You know, make sure that you're not overextending your budget. Make sure that, you know, your car note is not more than half of what you bring home. You know what I mean? Because when it comes to lending, I think people forget that we lend on gross. You live off net.

Yeah.

Like Ashley Ann says, blink, blink, blink. Like.

I love that, too. I love her. I love her, love her, love her. But it's important to kind of understand that. But I think that if you're protecting yourself. And like, for me, when I was looking at buying this house, we were building a house, and we were doing that, it was going to be the whole. All these things. And even though we could afford it, in the end, some things happened, and they happened differently, and we ended up looking for a different home. Well, I ended up finding a house that pretty much had everything, if not more than the house we were going to build, and it ended up being $100,000 less.

Wow. Okay.

And the tax rate. You know what the tax rate is here, T.J. instead of paying 3.67, it's 2.6.

Wow. That's big.

You know what I'm saying? Like, we're talking about hundreds of.

Yeah, Like, I'm talking, like, by comparison, we had, like, almost $1,000 savings in what we would have paid.

Absolutely. That's big. That's really big.

Could I have gotten that new? Swanky. Brand new. Oh, I live in a very exclusive subdivision. I sure could have. Could I still afford it? I sure could have. But at the same time, the fact that I'm in my amazing house that still end up having a. Of an acre and I'm spending a whole thousand dollars less, is that money going in my savings account instead of to the lender? It sure is.

Okay. Yes. Yeah.

You know, and so I want people to start thinking like that. Like, it's okay for you not to have the most expensive house.

Yeah.

It's all right. If no one else gave you permission, we're giving you permission.

Absolutely.

Because we don't want you to be in a situation where you have to worry about Deferring your payments because you can afford it.

So tell the people what you do.

T.J. okay, so I. I teach homeowners how to keep their homes. Basically, I am not a real estate agent or a mortgage professional. What I do is, when you purchase a house, I have a workbook that tells you if you ever go through any life events like.

Job loss, divorce, natural disaster, a major illness like cancer, who do you call regarding your house? What do you do if you want to keep your house? If keeping your house is not an option and you need to downsize, I show you in grave detail. I'm talking about. I have screenshots of what to click on, who to call. The numbers are in there. I created a whole workbook to help people keep their homes or to show them how to. How to sell their houses and get the most money out of it. So we have a membership shot membership site. I have a workbook. The whole program is $47. And my ultimate goal is that every homeowner in America has a copy of my system, and they get it at closing. Because like I said on my live, you know, we were in grade school, we learned to stop, drop and roll technique, because when you're on fire, you don't have time to think about, how do I put this fire out? You need to act, and you need to have something in your mind where you know, okay, stop, drop, and roll to put the fire out. And it's the same with foreclosure. When you find out you have cancer or your loved one has a can. Has cancer, or you have lost your job or you're going through a divorce, it's too devastating to be thinking about. It's just too much to have to think about right then. You need the information right now so that you know what to do. Even if it's just a book where you can look back through it and say, okay, she said, call my Linda. Let me call these people. It's as simple as that. So, yeah, that's my program.

And I think it's important. Like, even if. And it's a real situation, like, unfortunately, I hate to be. I hate to be the face of this for people in my life right now. But, you know, a lot of people. Some people know, some people don't realize that my fiance passed away six weeks ago.

And.

It was.

It still is. You know, like, it's a very devastating time, like, right now. But one thing that I don't have to worry about, that some people would, is how I'm gonna pay my Bills.

Exactly. Because a lot of people depend on that extra check. Yeah.

Like, for people who don't think that it can happen, because I was like that it can happen. You know what I'm saying? Like, and it can happen suddenly, and it can happen without explanation. And I. I just. I could take time, and I'm taking the time that I need to do what I need to do to go through. And his family is so amazing. Like, it's so ridiculous how blessed I am in that way. But to not have to worry about how my mortgage is going to be paid, because I already know it's going to be paid, is one less thing you have to worry about when you're already going through things like imagine being on fire and drowning at the same time. Right.

Yeah.

You know what I mean? Like, you really only have capacity in your brain for one thing.

One disaster at a time.

You know what?

I'm.

One thing at a time. Like that by itself is probably that this has been the most devastating thing that's ever happened in my life, ever in my whole life.

But at least I don't have to also think about how I'm gonna pay my bills. Like, I don't know what I would do if I had to go through my whole grieving process and we had to plan services and I had to worry about my job. And then I also had to worry about how. I can't imagine that, but it's helpful. Part of that is because we had certain things set up in a certain way so that if it happened, even though you never think that it will, that there is protections in place. So having things like your book that would help someone. I wish I had that when I went through my divorce 14 years ago.

And, honey, I have been through all of it and have been. So when I went through foreclosure, I was pregnant, and I had the worst case of mommy brain. I had all kinds of businesses. I owned a restaurant. I owned a office building for attorneys. And I had the worst case of mommy brain where I just couldn't think. So it's like, will you wake up one day and you just don't even know how to put your clothes on? You don't know how to tie your shoes or anything? And I guess that was God's way of helping me to deal with everything that was about to come down on me? Because I couldn't think. So could I. Could I go through, you know, all that I went through, as far as foreclosure, as far as the market changing and be Able to put out all those fires. It was impossible. My brain just shut off.

Right.

It's like, just let it all fall. Just let it all fall. But that's not necessary for other people. And that, that's part of what propels me to say, hey, I need to help other people before they go through this situation. I don't want anybody to feel like that. And nobody else is really saying it. Nobody's coming forth and really telling you what to do when you get in that situation. All kind of predators start coming out to either buy your home or, or act like some type of advocate. If I do have to act as an advocate for you, you have all of the information. I've given you the whole truth and will continue to give you the whole truth in the book, out of the book, in every conversation. So. Right. Yeah.

But I always say, like, there's a difference between paying someone to wash your car because you don't want to, but you know how.

Yeah.

And not knowing how to do it in the first place.

Yes.

You know what I mean?

Absolutely.

So it's a difference between, you know, it's helpful that you do that. Like, it's a difference between giving people the tools that they need to know if you did lose your job or if you are going to lose your job or if things are slowing down. Maybe you didn't lose your job, but you're just furloughed right now.

Yeah.

Like, you have a job technically, but you're just not having the same amount of income coming in. And you, you might need some assistance with deferring your payments. Or maybe you are going through a divorce while all this is going on and your significant other is no longer giving you money because they lost their job. Like.

Exactly. Or you're going through the loss of a loved one or you're going through other things. It is helpful to have one place with accurate information because Google is not your friend all the time.

Right.

It's helpful to have a book like yours that would assist people with understanding that. So if people are interested, you know, where can they find that?

So.

You can go to my website. It is Solutions by tj.com Solutions by tj.com There's a quiz that you can take right now where it'll actually tell you whether or not you're financially stable enough to keep your home when times get rough. And that's@solutionsbytj.com quiz q u I Z so and it's in my bio. The link is in my bio on my page.

I'm on Facebook as well. I'm on YouTube. I'm really, really posting quite a bit to YouTube as much as I can. I'm doing lives and trying to get the information out there. So YouTube is probably one of the best spots to subscribe to me now because I'm always there putting out.

Yeah, I'm going to start doing that a little bit more, too, because there's so much that's changing with guidelines. And for anyone who.