Q: My partner and I are self-employed. We deferred our Wells Fargo mortgage payments for two months in case contracts disappeared during the pandemic. But our payments are now current. Will those deferred payments affect our ability to get a refinance? Can lenders hold it against us?
A: As millions of American homeowners deferred mortgage payments during the pandemic, the Coronavirus Aid, Relief, and Economic Security (CARES) Act provided protections for those with federally backed loans, like Fannie Mae or Freddie Mac. Any deferred payments should not have harmed your credit, so long as you were current on your payments at the time you entered into the agreement.
In most cases, you would have to make three consecutive mortgage payments after the forbearance ends or under a repayment or loan modification plan before you could refinance or take out a new loan. There are some exceptions, like VA loans, which require a longer period of current payments. “It’s not a blanket three months,” said Marina Walsh, the vice president of industry analysis for the Mortgage Bankers Association, which found that 3.5 million Americans were in forbearance as of Sept. 6.
Not all loans are backed by the federal government. About 30 percent of home loans, accounting for 14.5 million mortgages, are privately held, according to the National Housing Law Project. These loans are not subject to the CARES Act. If you have a privately held loan, it is possible that your lender reported your deferred payments as late, which would affect your credit.
Private lenders “are not bound by the same terms,” said Ms. Walsh. “So it’s just a question of how they structured their forbearances.”
Whatever your loan type, contact your servicer and ask to review a copy of the agreement. Figure out what it says about how payments will be reported, and under what conditions you can refinance. These are questions you can ask at any time, ideally before you enter an agreement. Request copies of your credit report to make sure it doesn’t show delinquencies or missed payments, as mistakes and misreporting do happen.
“People need to be really vigilant in these situations about checking their credit,” said Evan Hendricks, author of “Credit Scores and Credit Reports: How the System Works, What You Can Do.”
If the payments are recorded incorrectly, file a dispute with the credit bureaus and contact your lender immediately. However, if you do not find errors in your credit report and you’ve met the terms of your agreement, a past deferment should not limit your ability to borrow money again.
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