Many lenders are providing borrowers with the opportunity to defer loan payments for a period, such as 90 days. The clarity of these deferments or change in term agreements vary. Lenders should clearly spell out the provisions so that the lender and borrower have no misunderstanding on what will happen. Although, not all inclusive, the agreement should:
- Identify the loan and the loan balance,
- Provide the exact period of deferment and when payments resume,
- The borrower should be clearly informed what happens to the deferred payments. Lenders are handling deferments differently. For example, if payments are added to the end of the loan and a larger last payment will be due, it should state that. If all the deferred payments will be due at the end of the deferment period, it should state that.
- When payments recommence at the end of the deferment period how will they be applied. If the resumed payments will be applied first to interest, it should state that.
- Clearly state if the length (term) of the loan is increasing. If the term of a mortgage loan is being extended, the lender may need to record a mortgage modification and get a title endorsement.
- A lender will want a waiver of claims and defenses by the borrower,
- There should be an explanation of when an escrow shortage caused by the deferment will be due.
For questions or more information, contact Sally Fox at sfox@esclaw.com or 850.433.3869.
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