When it comes to homeowners and tenants impacted by the coronavirus pandemic, the response by Congress, federal and state regulators -- and even individual lenders and landlords -- has been swift. Certainly much faster than the 2008 housing recession, when too many families lost their homes to foreclosure.
But there is no free lunch, no matter how badly you’ve been hurt. If you opt to take advantage of the benefits being dangled, you eventually will have to pay the piper.
For now, though, there are no fees, penalties or additional interest. You might not even be called upon to document a COVID-19 financial hardship, thereby removing an obstacle that stymied some borrowers the last time around.
“These are challenging times,” says Michael Jensen of FREEandCLEAR, a mortgage search engine. “It is important to know that if you are struggling financially due to COVID-19, there are multiple assistance options to help you stay in your home.”
Here’s a summary of what government and private enterprise are doing at this writing to help keep people in their homes.
-- If your mortgage was sold to Fannie Mae or Freddie Mac, all foreclosure proceedings, no matter the reason, have been halted as of March 13. But owners of vacant or abandoned properties need not apply.
To find out if your loan is owned by either of these two companies, which buy loans from local lenders and package them into securities for sale to investors worldwide, check your loan documents or call the company that collects your monthly payments. You can also check fanniemae.com and freddiemac.com, or call 877-542-9723 (Fannie) or 800-373-3343 (Freddie).
-- Foreclosures on loans insured by the Federal Housing Administration have been stopped for 60 days, as of March 18. Ditto for USDA loans, as of March 19. Again, check their websites, or call the FHA at 800-225-5342 or the USDA’s Rural Development office at 800-414-1226.
“The last thing any of us wants is for Americans to lose their homes,” said Housing and Urban Development Secretary Ben Carson. “If you’re struggling, immediate help is now available.”
Forbearance is available for up to a year on these loans, meaning you may not have to pay your mortgage for as long as 12 months. The rules differ -- with government loans, borrowers facing financial difficulty because of the pathogen are eligible for forbearance for up to six months, and lenders must provide an additional six months of forbearance if you ask -- so check with your loan servicer. But no matter what, missed payments won’t be reported to credit bureaus, so you credit score should not suffer.
As many as 300,000 borrowers have already inquired with Fannie Mae and Freddie Mac about forbearance, according to Federal Housing Finance Agency Director Mark Calabria. And he expects they will field upwards of 2 million more inquiries by May 31.
One source thinks there could be as many as 15 million borrowers who default on their loans. Another suggests servicers may have to absorb anywhere from $3 billion to $13 billion in loan payments to the investors who own our mortgages.
Most people are not in trouble, at least not yet, Calabria said. For the most part, they just want to know what their options are. So be patient; phone lines and websites are likely to be jammed.
But don’t hesitate, either. Don’t be ashamed, and don’t hide out, hoping you will be overlooked or forgotten. Take the first step as soon as there are signs of trouble. And be honest. If you haven’t lost your job or can still afford to make your payments, keep on trucking.
“We’re operating on the honor system,” Calabria said in a television interview. “This is supposed to be limited to if you’ve lost your job, you’ve lost income ... If you can pay your mortgage, please do so, because we really need to focus on the people who can’t.”
If you ask to skip payments, several options are available to make up what you missed. Your loan term can be extended, the amount owed can be added to you balance, or you can make up the difference by increasing your loan payments by a certain amount until you’re even.
If you still can’t afford your mortgage at the end of the forbearance period, the four federal agencies will try to recast your balance to make the payments more affordable. But you need to have been current on your loan on the dates mentioned above, or no more than 30 days delinquent at those times.
Loan modification guidelines take in to account not just the interest and principal still owed on your original loan, but also your property taxes, homeowner’s insurance, association fees and other recurring housing-related costs.
If you can’t make the grade under the rules, you will have to sell and move on. And if you can’t or won’t do that, foreclosure is the next step.
-- If your loan is with a private lender and Uncle Sam is not involved, call that lender or your loan servicer right away if you experience any financial setback because of the pandemic. Most offer some sort of relief. They don’t want to own your place any more than you want them to.
Private lenders are not legally obligated to offer any kind of forbearance. At this writing, though, Bank of America, Chase, Citibank, U.S. Bank, Wells Fargo and a couple of hundred other banks and credit unions have announced penalty-free forbearance plans, without interest, for up to 90 days. Bank of America has already processed payment deferral requests for some 50,000 customers.
Again, call your servicer -- or go online, which a Bank of America spokesman says is a “great alternative during these times of high call volume.”
-- If you are a tenant, know that many jurisdictions have halted evictions: New York (among others) for 90 days, for example, and Florida for 45. Alabama stopped evictions and foreclosures for 30 days, but rent and mortgage payments are still due.
The federal Coronavirus Aid, Relief and Economic Security (CARES) Act also blocks evictions. In FHA-insured single-family rental houses, the grace period is 60 days; in apartment projects backed by Fannie and Freddie loans, it’s 90 days. About 1 in 4 of all single-family and multi-family rental properties are financed by government loans.
Many individual landlords are bending over backward, so check with your property manager to see if he or she can do anything to help.
Among other things, advisory firm RCLCO found that big-time multifamily outfits are offering flexible payment plans for those unable to make their rent, waiving late fees and offering flexible renewals with no rent hikes for 90 days. Landlord Mario Salerno, who owns 18 buildings in Brooklyn, New York, has canceled rents for all of his tenants, saying he is more concerned about their health than the money.
Rentec, a property management software company, has compiled a state-by-state guide to the various resources available to tenants: see rentecdirect.com/blog/ultimate-state-guide-coronavirus. And the Consumer Financial Protection Bureau has resources on its site (cfpb.gov) that will help owners in their talks with their lenders.