Mortgage Forbearance Agreements and Payoffs

When the forbearance agreement servicer is not the mortgagee, obtain a separate payoff statement.

As unemployment numbers rise due to the effects of COVID-19, many lenders and their borrowers entered into forbearance agreements to suspend mortgage payments as allowed under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The trend continues as more homeowners face changes. Problems arise when the mortgage is being paid as part of a sale or refinance transaction, and the payoff statement has no explicit reference that the statement includes all the deferred interest that accrued under the forbearance agreement. This is especially true when an entity other than the mortgagee is servicing the loan and issuing the payoff statement, but not servicing the forbearance agreement. In these situations, ATG requires a separate payoff statement from the mortgagee or servicer of the forbearance agreement.

To prevent rejection of the payoff, inquire of the mortgagor whether a forbearance agreement is in existence. Additionally, include this language in the payoff request letter:

Please furnish a statement of the amount necessary to pay the loan in full including any amounts deferred due to a forbearance or modification agreement.

If the borrower entered into a forbearance agreement and you are not the entity servicing any deferred amounts, please provide the contact information for the entity that is servicing such amounts.

The Schedule B exception regarding the existing mortgage(s) of record should now include the following additional paragraph:

ATG should be provided with a statement from the borrower(s) regarding the above mortgage disclosing whether the borrower(s) have entered into any forbearance or loan modification agreement with the lender regarding delayed or postponed payments or other restructuring of the debt secured by the mortgage.

ATG is preparing a form for the borrower(s) to execute containing the foregoing information. We will post a link when the form is available.

If there is any indication that the borrower and lender have entered into any such forbearance or modification agreement, and the payoff statement does not include the deferred interest or other amounts due under the agreement, then the closing must be postponed until updated or new payoff statements can be obtained, or sufficient amounts must be withheld in a title indemnity deposit retained by ATG until updated or new statements are obtained.

If you have any questions, please Contact an Underwriter. Thank you for your continuing support of ATG.

Posted on: Mon, 09/21/2020 - 10:48am