Forbearance becomes a ‘Scarlet Letter’ on credit reports

Mortgages in forbearance as a result of COVID-19 have to be reported as “current” on credit reports.

That’s the law, as laid out in Section 4021 of the CARES Act passed by Congress at the end of March. It says servicers “shall report the credit obligation or account as current.”

But, it turns out there’s a workaround that can make it difficult for people with mortgages in forbearance to get another home loan after the COVID-19 crisis is over – for as long as a year after the forbearance period ends. That can impact their ability to refinance or buy a home when times are better.