New guidelines allow anyone to opt-in to the forbearance program for up to six months without harming their credit.

Former MBA president David Stevens spoke at the second day of Mortgage 2020. He was critical of the forbearance program, the moral hazard it creates, and the potential implications it will have on servicing liquidity. He said: “What surprised me about the forbearance program was that when I was involved in 2009, we had a plan and in an effort not to create a moral hazard -- in other words not to provide taxpayer support for people who didn’t need it -- we required a hardship letter. This time it won’t work like that. Anyone can get it if they are in an agency program, for up to six months and it won’t harm their credit and it doesn’t matter whether they have a hardship or not anybody can opt-in.” Stevens said that there is already some evidence that the system is being abused. “I heard from a large lender that there are actually some Realtors using forbearance to market -- buy a home and skip the first six months of payments. The shockingness of that is why you need to be careful about moral hazards when you create public policy. I think they missed the mark here but nevertheless, it’s in place.”

Source: Rise and Shred