Forbearance and the Next 6 Months

August 12, 2021
2:56 pm
Our Guest: Sean Varin

Sean Varin, CEO, and President of Encompass Lending Group, will be with us on Wednesday, August 18th at 2:30 PM EST for another episode of Fathom Live. Don’t miss all of Sean’s insights into the current mortgage market and how best to serve your client’s home financing needs.

Wednesday, August 18 @ 1:30 Central Time.

Show Transcript:

0:00:00.0 Geoff: Hey, everybody, thanks for standing by there. Two software updates not talking to each other, it looks like it’s happening. But we were able to get Sean back on here. So, Sean, I’m gonna invite you back on the screen. So, I’m waving my wand. Did it work?

0:00:19.3 Sean: Here we are.

0:00:20.9 Geoff: There… I hear you.


0:00:24.8 GEOFF: You’re here. You’re here. And I see you. So this is good. Man. Guys, thanks, thanks for hanging tight. We’re gonna have this conversation come hell or high water. I was asking you, you know, since our kind of like crisis episode in April 2020 of what’s going on with mortgages in the pandemic, what’s happened since then that our agents should be aware of? I’m really looking forward to discussing this.

0:00:52.5 Sean: Yeah, absolutely. Everything has happened since then. But the good news is, is we’re on the tail end of it, knock on wood. Back when we talked to you guys in April, pretty much every day was an update with more and more changes in the lending world. Overlays from lenders, Fannie Freddie locking things down. So it’s nice to be at this side of it. We’re actually at the tail end of loosening up those overlays. Again, knock on wood, we’ve gotta see what’s going on with Delta, but we’re starting to see a normal lending environment, which is good to see. It’s good to be out and about visiting with the agents, and have the agents out and about. Hopefully we’ll keep pushing through it, but it’s definitely a different world than it was in 2020.

0:01:40.7 GEOFF: And also a little bit of a different world for you, right?

0:01:45.3 Sean: Yeah, no, absolutely. We’ve made a transition. We’re with Parkmont Lending and we’ve made a transition, or we are making a transition, over to Encompass Lending. So, super excited about that opportunity. Congratulations to you and Fathom, as well. There’s been a lot of great activity with Fathom, acquiring a mortgage company, a title company, insurance company, SaaS companies, you name it. It sounds like Fathom is doing a phenomenal job of expanding and providing a better organization and opportunity for the people. So, hats off to everybody.

0:02:16.1 GEOFF: Yeah, thank you. And yes, definitely lots happening. Let’s jump into the forbearance thing that’s happening. Congress last year passed the CARES Act, which then allowed homeowners to forego paying their mortgage payments for… It started off like six months and then got extended. And now, at this point, at least from what we can see, that is expiring here September 1st, correct?

0:02:39.7 Sean: September 30th.

0:02:42.3 GEOFF: Or September 30th. I’m sorry. Oh yeah, September 30th. How many homeowners have taken advantage of this program and, at least from what we can see, what’s gonna happen with all of that?

0:02:52.7 Sean: Yeah, statistically, at the height of the program, there were as high as 7.2 million mortgages…

0:03:00.3 GEOFF: Wow.

0:03:00.4 Sean: Were taking advantage of forbearance. That’s a lot of people taking advantage of the program. Today, or actually as of June of this year, the number has come down quite a bit. It’s sitting around 2-2.2 million people… Or I shouldn’t say people, mortgages are still in forbearance. And so the good news is obviously those people taking advantage of it and we’ve got it down to hopefully a little bit more manageable number. The thing you’ve got to think about is the remaining 2.2.

0:03:31.5 GEOFF: Right.

0:03:32.8 Sean: What was the status of those mortgages before the forbearance? Are these people in trouble, or are we gonna be able to navigate these waters? The great news is… I’ve been doing lending for about 20 years. So I was in this when we had the crash in 2008.

0:03:49.2 GEOFF: Right.

0:03:49.9 Sean: And the good news is, I think, that everybody has adjusted well. I do think there’s been good decisions made through the government. And I know not everybody loves all the decisions that they’re making, but we’ve navigated the waters really well. I think the lenders have done a fantastic job navigating these unique times. And so we don’t feel like we’re gonna have the challenges that we saw in 2008. The biggest difference is, in 2008 you had a home crisis, that were depreciating and going down quickly. The current news is, in 2020 and ’21, we’re seeing tremendous amount of appreciation, which is giving these people an opportunity to evaluate where they are in their lives and make adjustments accordingly. But at least they’re not underwater with their homes, which is allowing us to have strong consumer confidence, and allowing us to come out of this a lot better than we probably should have. But I’m glad we are, for everybody’s sake.

0:04:42.5 GEOFF: If I have taken advantage of the program and I haven’t made payments over the last 12 months, and let’s say my house payment is 2000 bucks a month, I have $24,000 worth of payments that I owe, at least at this point. So, from what I understand, though, that’s not all coming due September 30th for the homeowners. So how does that work with what kind of goes forward with those homeowners? And then can they sell their home, and then what… I’m sure, of course, they can sell their home. But in selling their home, what happens to that 24,000 bucks?

0:05:14.0 Sean: Yeah, no, that’s a great question. And just to give everybody a quick idea about the program. It’s basically a six-month program, but you can file for it every six months, with a maximum of three six-month intervals. So people have the opportunity to be almost 18 months without payments. But after that, then you’ve got to make some decisions. But to answer your question, that 24,000, it technically does come due when your forbearance period is over. It’s just you have options at that time, and you have to get with your servicer. There’s not a blanket answer, because it also depends on, was it a conventional loan, was it an FHA, VA, USDA, the type of loan, who’s servicing the loan.

0:05:54.2 Sean: There’s a lot of variables that dictate what options will be available. But technically it does, it becomes due. Now if you have a government-backed loan, so an FHA, VA, USDA, part of that program is, you cannot force somebody to pay all of it in one lump sum. So they’ve taken that option as far as forcing servicers, or having servicers force the clients, consumers, to make that one payment, that’s not an option for the government-backed. They have to go back and try to figure out what’s gonna be a good way for these people to get back on track.

0:06:29.7 Sean: And there’s typically four options. You’re gonna pay the lump sum for those that have the means and ability to do so. You’re gonna… You could either stretch it out over a 12-month period, so it’s a repayment plan. And then you’ve got a deferment, which allows you to take it and put it at the end of your current mortgage. And so if you’re on a 30-year mortgage, and let’s say you haven’t made payments in a year, you’re gonna have 31 years basically to your mortgage, that’ll…


0:07:15.7 Sean: Left on your loan, stretch it out over that 18 years. So they’re trying to figure out ways to get these people in a position that they can be comfortable with making payments.

[background conversation] [music]

0:08:02.4 GEOFF: Lost another piece of technology here in the middle of our stream. So, kinda follow-up question, you said that government-backed loans that they can’t force somebody to pay all of those payments at one time, so what about a conventional loan? Is all that coming due at the end of September?

0:08:24.4 Sean: It can. So, again, it’s gonna be dependent on the servicer. So anybody that’s in forbearance right now, they need to be reaching out to the servicer. Once you get about 30 days from the ending of your forbearance, you really need to be discussing the options with your servicers.

0:08:38.8 GEOFF: Okay.

0:08:39.2 Sean: Conventional, they have the opportunity to push on that, but at the end of day, they want these people to get back on track and keen to make payments.

0:08:46.1 GEOFF: Gotcha. So suppose though I’ve filed for an extension or whatever, and it’s been enough payments where I go, There’s no way I’m making this payment and it’s probably better at this point to get out, or maybe to sell my home, find something a little bit cheaper. How does the sale of the home and those… I don’t wanna say delinquent, but forbearer, [chuckle] whatever the past tense of that…

0:09:12.0 Sean: I know where you’re headed with it.

0:09:13.7 GEOFF: Yeah. What do I do with that?

0:09:13.8 Sean: Yeah, so absolutely, so what you’ll do is you go through a similar process if you’re gonna just put your house up for sale. When you or the title company or agent, you guys get a payoff letter, in there you’re actually gonna see a separate line on them… On most of them that we see, you’re gonna see a separate line on it that has forbearance amount. And so that way they’re breaking down the exact payoff, and why it’s gone up by 20,000 or 24,000. So they’ll break it up, and you can do a sale, there’s nothing wrong with doing a sale, especially in this environment; there’s still equity to be had in houses. And so that’s where I think we haven’t felt the economic turmoil, because you’ve got 7.2 million loans were structured this way, and so we’re down 2.2. So a lot of those have either sold or re-financed.

0:09:58.9 Sean: You can still refinance a loan if you’ve done forbearance. The biggest thing that most people need to prepare is, if you wanna take advantage of the rate environment, as low as it is, and you’re in forbearance, you have to get out of forbearance and make three months of payments. So, getting back on track, showing the mortgage company that you can make payments, and it has to be three consecutive months. You can’t get out of forbearance and then day one stroke a check for three months of payments and say, “Hey, there’s 90 days.” They wanna see that you actually can facilitate three payments… Or your monthly payments on a consistent basis.

0:10:34.7 GEOFF: Okay. So does that affect my… Does any of this affect my credit, if I am gonna refi or look for another home?

0:10:44.4 Sean: Yeah, no, no, it’s a great question. And so part of the CARES package was that this wouldn’t negatively impact your credit score. So we as lenders can see that you’ve filed for forbearance. We’ll see it, it’ll show zero payments made when they break it down by month of the amount of payments that were made on a monthly basis, we’ll see zero in there. But once you pay off, let’s say you sell your house and you pay off the forbearance, it’ll go back in there and just… It’s like it never happened. But we can see it, it just it won’t negatively impact your score.

0:11:19.6 GEOFF: So if I have a client then… Considering all this, if I have a client that is considering selling, should I be asking them questions, like, “Have you taken advantage of this program?” What do I do to make sure that they don’t get into trouble, or there aren’t unforeseen difficulties on their next loan?

0:11:37.3 Sean: Sure. Yeah, no, absolutely, as realtors and even lenders, we should be asking those questions, because a lot of… They’re making life decisions based on the information that we’re giving them, and so when you start doing net sheets and advising a client what they potentially could have after closing, you’ve gotta make sure you’ve got these questions answered. So a great question is to ask that client, “Have you taken advantage… ” It’s a personal question, and some people will be uncomfortable to say, “Yeah, I took forbearance.” It’s all on presentation. So if you do present in that way, as far as, “Hey, did you take advantage of it?”, be positive about it. It is what it is, but be positive about it, don’t make them feel insecure or uncomfortable.

0:12:12.6 GEOFF: Yeah. Oh jeez, really, you did? Man, that sucks. [chuckle]

0:12:17.3 Sean: Yeah, so you have to ask those questions, because if they answer yes, and then you just… Then it’s follow-up with, “Okay, awesome. What we need to do is we need to get the forbearance paperwork, we really wanna understand how much is in forbearance. ‘Cause what I really wanna do for you, Mr. Client, is I wanna make sure that you know how much money you’re working with after the sale of the property.” So, it’s a great question, it can still be a positive thing, but you have to know it, and you have to prepare, because if they were trying to utilize that to pay off debt afterwards, go into another house, you’ve got to have conversations to make sure that you’re working with real numbers. The last thing you wanna do is put a client in contract, you’re going to closing, payoff gets there, and they thought they were getting 25,000 after closing and they get zero.

0:12:55.3 GEOFF: Right, right. So, prepare them for what could be a price difference in their…

0:13:04.7 Sean: And I would just add to this, ’cause again I think our roles in this world is to protect these people and make sure that we’re setting them up for success…


0:13:19.7 Sean: “Made a forbearance?” “I did.” “Great. And if you don’t mind me asking, were payments on time before forbearance?” And that’s a really uncomfortable conversation to have, but if they say that they were late going into forbearance, then they’ve very limited options as far as buying a house immediately. They actually… They have to go and re-establish themselves, we’ve gotta see some credit history of them back on track. So the last thing, again, you wanna do is have them go on a contract, sell the house, and because we were afraid to ask those questions, they think they’re gonna be able to qualify and buy another one, and they can’t because they were late before going into forbearance. If they were clean and they were up-to-date going into the forbearance, not a problem. It’s just if they were late, and I can promise you there were people that were late going into this, so we have to ask those questions.

0:14:09.5 GEOFF: Then as far as refinancing, and maybe you already talked about this, how does that work? You know, is it kind of the same thing as just getting a loan for a new house, I just have to make sure that… You said, I have to make three months of payments. So 90 days, pretty much, that I’m looking at before I should consider refinancing. And then when I do, I’m just factoring in that line item of unpaid payments, basically, from the forbearance program.

0:14:40.6 Sean: Yeah, so the forbearance actually works a different way. So what you do is you contact your servicer, say, “I want to come back out of forbearance,” they’re gonna offer you some different options. And so we’ve had clients that wanna take advantage of the rates, and they’ve paid… They were only three months into forbearance, so it wasn’t a huge number to them, and so they could make that payment and get current. So those… And then make their payments. So those, you can go that option. Some of them actually will just almost nod and say, Hey, can you stretch it out over 12 months? That was what a lot of people that we dealt with, because it was, you know, middle to the end of last year and they want to take advantage of the refinances. So they took three payments, six payments, and they stretch it out over a year. And so then they made 90 days of payments at the higher level, and then we refinanced them to get them to take advantage of the current market. They’ve got to have… They got to be out of forbearance, and they got to have three months of consecutive payments.

0:15:29.4 GEOFF: Gotcha. Okay. Just kind of shifting gears then. And I know you don’t have a crystal ball, but there’s a lot of chatter about is the market cooling off, will home prices come back down, since they’re extraordinarily high right now? What do you see as kind of the next six to 12 months? And what key indicators should people be looking at in sort of trying to understand what’s happening?

0:15:57.1 Sean: Yeah, no, we get that question… Yeah, we get that question asked all the time. And first and foremost, you got to also recognize what market are you in. So here we are talking to people and they’re across the United States. There are definitely states that are seeing a greater benefit, meaning Texas, even… Idaho, some of them even unique states because of this remote work environment that we have, we’re seeing surges in certain states. But the market plays a role in answering that question. I’ll speak specifically for Texas. I’m in Texas, so I get asked this all the time.

0:16:27.0 Sean: And they’re like, Well, Sean, should I just ride it out, we’ve seen such a quick appreciation rate in Texas, will it depreciate? Will we settle down, and should I wait six months a year to buy a house? And here’s the reality for Texas, we’re not going to see depreciation, right? Worst case is we see a neutral, back to the 3-5% appreciation over the next year or two. Honestly, I think we’re still gonna be super strong in Texas, because we have so many people coming into this area. So we’re not going to catch up on inventory, even if you take the 2.2 million and put them in their states that they’re in, it’s still not gonna be enough inventory for the amount of buyers that we have that are migrating to Texas.

0:17:09.8 GEOFF: Gotcha, yeah.

0:17:09.9 Sean: And so the playing the wait game, even if it settled down, and let’s just say there was no appreciation, but you still got interest rates that are going to climb. And so we will see the rate environment, like the legislation is trying to do… Or the administration is trying to do as much as they can to keep real estate going. And so you saw they came out, they were pretty neutral on the rates, talking about spreading it out over the next year and a half, two years, by adding to the core, every six months to 12 months. We’ll see what happens with [0:17:40.2] ____ the rate, they know that they’ll continue to push it up. So by the time we sat around and said, Well, we’ll wait for the pricing to go down, first of all the pricing of homes in Texas is not gonna go down. And then now you’ve got higher interest rates. So you may…


0:17:56.0 Sean: You gotta have that conversation with a local expert, to really have good advice.


0:18:10.9 Sean: And I can keep going if, we need to.

0:18:13.6 GEOFF: Alright, sorry about that. So, somebody asked earlier here, Theresa said, I was wondering if there… I was reading that there was another one time three-months extension for the forbearance for FHA. Is this true?

0:18:28.5 Sean: Right now, it’s still what is in play is the three six-months opportunity. There is a lot of focus on if they’re going to extend it out any longer. There hasn’t been anything definitive yet.

0:18:41.5 GEOFF: Okay. So just in discussion, possibility but not…

0:18:46.3 Sean: Yeah, they’re still looking at options on it. Again, this information changes almost daily. [chuckle]

0:18:51.4 GEOFF: Right, right. So at this point, if I’m an agent, I’m going to help my clients deal with what I know to be true. And that is, it very well could be, it’s probably gonna be September 30th that you’re gonna have to make some decisions. Not…

0:19:06.2 Sean: Yeah, we’ll see on the statistics of Delta, and how the CDC comes out with guide. I mean, again, this could be something that changes on a daily basis depending on what we see, if there is spike in cases, and certain areas and states and stuff like that.

0:19:20.5 GEOFF: So going to kind of the forecasting, then, I mean, if I’m in a home and I’m in a market like Texas or Idaho that just seems to be kind of strong, there’s low inventory, a lot of buyers, I’m probably just gonna sit still for a while, is that what you’re thinking?

0:19:35.3 Sean: Well, no, if I’m in a point in my life where I want to buy something, I mean, I don’t want to sit back and think that the price is going to go down. It’s not.

0:19:44.3 GEOFF: Gotcha.

0:19:45.2 Sean: I can tell you, I monitor the real estate quite a bit, and the drop in lumber alone, the drop in lumber costs, has seen a huge spike in builders finally moving forward building spec houses and getting back into the building process. So, no, in Texas specifically, I might as well buy today, because the one thing I’m gonna hurt myself is if you believe there’s gonna be some appreciation over the next year, strong appreciation here, and interest rates are gonna climb. So my purchase power is going to diminish.

0:20:12.0 GEOFF: Okay, so kind of the opposite, then. Like, I mean, don’t wait because you’re hoping that you’re gonna… Things are gonna cool off, and then you’re gonna, you know, snatch your home at a lower price, I might as well buy now and it’s probably gonna appreciate in value from the time that I buy it.

0:20:24.7 Sean: This, again, please get with the local experts, have your client… I don’t know if clients are seeing this or not, but clients need to be working with local experts that can give them that good information. I’m specifically speaking to Texas…

0:20:37.0 GEOFF: Gotcha, gotcha. Any last, pieces of advice before we let you go. And thank you, by the way, for rolling with the punches of technical difficulties. Both the audience and you, Sean.

0:20:47.9 Sean: Thank you, no, it’s been fun. I would just say, Hey, you know, stay positive, there’s a lot of things going on, a lot of positive things going on in the real estate market. You’re gonna continue to see a lot of press and the politics always going on. Just do what you do best, and that’s protect your clients, educate your clients, help them through the process. That’s what our role is, right. And if we do that to the best of our ability, we’re going to take care of a lot of great clients. But just, know that there’s gonna be variables, we didn’t get into discussion of appraisals and the challenges going on with appraisals, maybe that can be a whole nother show.

0:21:20.3 Sean: But you got to kind of roll with the punches. Service providers that are involved in a real estate transaction, they’re still buying, right? And so you just got to do everything you can to protect your clients. And that doesn’t mean beating up on all the people and it’s, [0:21:33.7] ____ price will get out there tomorrow, survey be out there tomorrow. We’ve got to work together. And if we can do that as professionals, you’re gonna see happy clients. Happy clients are referring clients. So, we can still do our job and do it in a positive and professional manner, and that’s what I love to do and, have happy clients at the end of the day.

0:21:53.4 GEOFF: Alright, Sean, thank you so much, and we’ll let you go. It’s been a pleasure. Before the rest of you go, if you haven’t checked us out, head over to, find a company that works for you rather than the other way around, giving the tools and technology designed for your success, including equity ownership, powerful CRM, a truly affordable health care, and teller agents transaction management system, multi-tiered support, local leadership, marketing resources, and so much more. Again, it’s at Our next show, as we said, we have Bryce Olson, so another boots on the ground agent, and he’s got a great success story. Very enjoyable person to talk to. So I look forward to interviewing him here in our next show in September. We’ll see you then. 

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