Mortgage Payment Suspension

[GhostRider103]

Taken straight from Wells Fargo:

Your payments will be suspended for the next 3 months
We won't charge late fees
We won't report a past-due status for this account to the consumer reporting agencies
At the end of the initial 3-month payment suspension, we will guide you on the next steps which may include: a continuation of the payment suspension; moving the missed payments to end of the loan; or a modification to address longer-term financial changes that may impact your ability to keep up with the monthly payments
We will not take foreclosure activity during this period
If you’re in an active bankruptcy, we recommend you speak with your bankruptcy attorney to see what options may be available to you

Thoughts on participating in this?

[RWD]

You shouldn't do this unless you are experiencing financial hardship. If you can make your payments, you should.

[solon]

You shouldn't do this unless you are experiencing financial hardship. If you can make your payments, you should.

OK, but why? Why wouldn't you take three months off if it was allowed?

[LWYRUP]

You shouldn't do this unless you are experiencing financial hardship. If you can make your payments, you should.

OK, but why? Why wouldn't you take three months off if it was allowed?

Because if everyone does it, civilization collapses?

Or, more likely, Wells Fargo stops the program and someone who could have been helped gets screwed.

I get that it's mathematically optimal to defer and invest.  But sometimes you just need to leave some on the table as a common courtesy.

[RWD]

You shouldn't do this unless you are experiencing financial hardship. If you can make your payments, you should.

OK, but why? Why wouldn't you take three months off if it was allowed?

It puts more stress on the banks than necessary? I didn't go into details because I don't fully understand the economic ramifications myself.

[pressure9pa]

I don't know if this matters, but I see that the bank won't report delinquency to the credit bureaus.  However, they can/will see that the amount owed is the same or slightly higher over the next 3 months.  Might the algorithm find this and lower credit scores as a result?

[Jouer]

Canadian banks are doing this as well. They key reason not to do it unless you absolutely have to: there is no discontinuation of interest. i.e. interest is being accrued as you are not paying. That means payments will increase a little once you start paying again.

[GhostRider103]

I don't know if this matters, but I see that the bank won't report delinquency to the credit bureaus.  However, they can/will see that the amount owed is the same or slightly higher over the next 3 months.  Might the algorithm find this and lower credit scores as a result?

That would be somewhat deceptive, we will see though.

Sent from my Pixel 3 XL using Tapatalk

[Cheddar Stacker]

You shouldn't do this unless you are experiencing financial hardship. If you can make your payments, you should.

OK, but why? Why wouldn't you take three months off if it was allowed?

It puts more stress on the banks than necessary? I didn't go into details because I don't fully understand the economic ramifications myself.

Solon I love the question because why not?

RWD, your initial response has a solid base. Let me expand a bit.

First, the generic "Fuck Wells Fargo". They can afford a lower profit, right? But, they will lay people off and their shares will decline in value hurting their stockholders (aka, mustachians, aka me and you).

Second, a related, first person story about the financial stress RWD is referring to. I'm sure most of you have heard of PPP by now. An SBA program offered to small businesses to supplement unemployment by diverting government funds to cover payroll if you keep your employees on the payroll.

Sounds great right? And as Solon put it, why wouldn't you if you could?

I spent many hours this past week learning, consulting, assisting, answering questions, and completing applications for PPP. While the intentions are great, and untold numbers of businesses NEED this, everyone wants it. It comes with forgiveable loans of up to $10M. Every business would be crazy if they did not apply.

Except, there is a limited pool of funds. If my $100M business needs $10M to cover payroll and I pay my banker, CPA, and lawyer drastically higher fees than that non-profit that needs $100K to avoid bankruptcy/closure, guess who gets the attention and funding?

Every deferral or subsidy or PPP is a potential strain on the system. Hard to say no to it, but in the bigger picture, hard to look yourself in the mirror knowing you are taking a benefit away from someone who needs it more than you.

All that said, it's really hard to not agree with Solon, why not? If not you, the $100M company will still beat out the small Non profit.

So OP, #GhostRider103, not trying to troll you, but... are you at risk of financial collapse? Are you ok doing this to better your likely already nice financial situation if it means someone of lesser means loses their house eventually. Tough question. I'm going through similar scenarios in my world/head now. This is unlike anything we've seen before.

Good luck to everyone navigating these muddy waters.

[SKL-HOU]

Canadian banks are doing this as well. They key reason not to do it unless you absolutely have to: there is no discontinuation of interest. i.e. interest is being accrued as you are not paying. That means payments will increase a little once you start paying again.

On one source i read, it said the interest will only accrue as if you already made the payment for CARES ACT.

I agree with others saying not to do it unless you need it. There will already be so many people applying, no need to tie up the workers any more than they need to and so the people who really need it can get the help sooner. The intention is for those that need it, not ok to abuse it.

[Dicey]

We have three mortgages on three rental properties. One of them was written as a second home, because the bank insisted on doing it that way. One or all of them will qualify for deferral, but we will not be doing this. We don't need to because our tenants are all able to pay and our income is unchanged (I'm FIRE, DH still works). We also believe in Big, Fat Emergency Funds, so we're going to pass in hopes that more resources will be available for others who have a genuine need.

[Loren Ver]

It is an interesting question.  DH has kinda been hinting about it.  We are FIREd with a mortgage, but we have a cheap house and low expenses.  Even though our small stash took a hit, we should be good for a while before any pressure starts to give us any grief.

Maybe one day in the future we might be in a bad spot, but things would have to be really really bad for a really long time for that to happen.  I don't see us taking a slot from someone that needs it now just because we can. 

Also, there is no way I am using my FIRE time to do paperwork for something I don't need.  I ain't got time for that nonsense.

:D.

[John Galt incarnate!]

I don't know if this matters, but I see that the bank won't report delinquency to the credit bureaus.  However, they can/will see that the amount owed is the same or slightly higher over the next 3 months.  Might the algorithm find this and lower credit scores as a result?

I think in my state (CA) the relevant parties agreed that delayed mortgage payments due to the pandemic  will not be cause for lowering credit scores.