With millions of Americans suddenly out of work due to the coronavirus, the U.S. economy is bracing for the reality that many won’t be able to pay April’s bills. Federal regulators and state governments are scrambling to keep late mortgage payments from turning into a foreclosure wave—and financial relief is available. If you have a mortgage and have been affected by the coronavirus crisis—either directly or indirectly—and are worried about making loan payments, here’s what you need to know.
First, Find Out Who Owns Your Loan
Finding out which mortgage relief program you may qualify for depends on who owns your loan. Due to the way that the mortgage market works, the bank that originally issued your loan (and which receives your payments) might not even own your loan anymore. Once closed, a loan is often sold to the government-sponsored enterprises Fannie Mae and Freddie Mac.
FHA-insured loans will be indicated on your mortgage closing documents. If you still don’t know, call your loan servicer (who you make your checks out to). Either way, you’ll have to call your servicer in the end to get started on a forbearance program. To look up your mortgage servicer, try searching the Mortgage Electronic Registration Systems (MERS) website to see if it’s listed in their database.
Have a Federally Backed Mortgage? You Can Suspend Payments for Up to a Year
Under the $2 trillion coronavirus relief bill signed into law March 27 (the CARES Act), homeowners with a federally backed mortgage loan—according to the AARP, about 80 percent of all mortgages—experiencing financial hardship due to the coronavirus can request forbearance for up to 360 days.
To request forbearance—a timeout for payments—call your servicer (brace yourself for a lengthy phone queue) and tell them that you are experiencing financial hardship during the COVID-19 emergency. Providing proof isn’t necessary—you’ll receive up to 180 days forbearance upon request, after which you can request another 180-day extension if you need it.
During a period of forbearance, no interest or fees will accrue; your credit will also not be affected.
No Foreclosures on Homes With Federally Backed Mortgages for at Least 60 Days
Beginning March 18, non-vacant homes with federally backed mortgages cannot be foreclosed on for 60 days, according to the CARES Act. Some states, such as New York and California, have issued executive orders to suspend foreclosures for 90 days in light of the pandemic.
What to Do if You Don’t Have a Federally Backed Mortgage
Don’t stress. Private service lenders are highly incentivized to work with the government—after all, many of them sell loans to Fannie Mae and Freddie Mac—and many have announced similar relief programs or are expected to follow suit.
Since not all homeowners have federally backed mortgage loans, some state governments are working with the private sector on deals.
New York, New Jersey, and California have announced 90-day grace periods for mortgage payments with several large banks in these states, and other states could follow suit.
If your state is not one of the three listed above, you can look up your mortgage servicer (if you already know who it is) on the American Bankers Association website to see what mortgage relief options they may offer. A list of credit unions and their options can be seen here. The criteria and terms for forbearance will vary by your lender, and you may have to provide documentation of how you were affected by the coronavirus when you call.
What to Do Before You Call Your Servicer for Mortgage Relief
NOTE: If you do not need immediate assistance and are able to make your mortgage payment, please do not call because you’ll take time away from those who need it most.
If you are experiencing financial hardship, you must contact your servicer (the entity you send your money to every month) immediately. Since servicers are swamped, you should prepare yourself to spend hours waiting on the phone.
Before you talk to your servicer, you should check to see if you have a federally backed mortgage (see first section), in which case you do not need to provide any proof of hardship when you request forbearance.
If the loan is not federally backed, it is best to prepare documentation of coronavirus-related hardship (in case they ask) and write down what percentage your income has gone down by so that you and your servicer can figure out how much you might be able to pay a month.
Remember many servicers are still sorting out the details and might not have all the answers just yet. Protect yourself by documenting all communication along the way.
Important Coronavirus Mortgage Relief Takeaways
Do not stop making mortgage payments until you receive forbearance (and have it documented) as any late payments will negatively impact your credit. Depending on your servicer, you might not qualify for their forbearance program if you’re behind on your mortgage.
The mortgage market is complicated, and there are many technicalities. The relief program offered to your friend or family member might not be the same one offered to you. That’s why it is important to know who owns your loan, to call your servicer, and to document all communication while you find out which relief you qualify for.
Forbearance is not forgiveness of debt or free money—it’s a time-out on payments. Unless you work out a different kind of deal with your servicer, all of the payments you missed will be due eventually, either in a lump sum after the grace period or tacked onto the length of the mortgage right along with your regular monthly payment. Understandably, this is distressing for those with income insecurity, and these terms may change in the future as we move into the uncertain month of April.
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