According to National Mortgage News (May 2020), Coronavirus related delinquencies due to forbearance cannot be reported as delinquency on a borrower’s credit profile. However, it may still have affects on the borrower’s ability to refinance or get a new loan.
The Federal Housing Finance Agency (FHFA) announced just this week that Fannie and Freddie Mac will allow borrowers with COVID-19 related forbearances to refi their loans or buy a new home. The stipulations are that the borrower must have made three straight monthly payments after their forbearance period ends (Housing Wire).
This is a good thing for most borrowers with FHA or other Government Sponsored Enterprise (GSE) backed mortgage loans. As note investors, these announcements are not applicable as we are private investors who have likely worked out our own forbearance agreements or modified our loans through servicers.
Another great reason to invest in notes is the flexibility you have as the bank to directly assist borrowers in a more personal and tailored way. This relaxation of forbearance rules and the impacts it may have on borrower’s credit, could also translate to your borrower’s potentially being able to provide you with an early payoff on your note.
How? Well, if you have offered your borrower’s some of the same terms regarding protecting their credit while in forbearance, they may be able to utilize traditional bank refinancing to pay off a high interest mortgage loan. This will show that they had a steady payment history and successfully made it through a forbearance plan.
Now imagine you used your Self-Directed IRA (SDIRA) or 401K to invest in notes like I have been telling you? Your returns on a note payoff would be better than the average 1% returns you may be seeing now.
As always, stay safe out there.
For more information on notes or if you have notes to sell, reach out to Zee at Awanna Holdings, LLC (571)659-5005. ©Awanna Holdings, LLC (May 2020-19), firstname.lastname@example.org