Mortgage payments are due Wednesday across the country, just as millions of Americans are beginning to deal with economic hardships caused by the COVID-19 pandemic.
The $2 trillion CARES Act comes with significant benefits for homeowners who are unable to make their mortgage payments – most notably a moratorium on foreclosures and the right to forbearance.
Many homeowners believed that the mortgage relief items applied to all borrowers but are quickly discovering they aren’t universally available. Homeowners in need must work with their lenders to identify the best solution for their individual situations.
Here is a look at what you should do to seek relief from making mortgage payments in the coming months:
Do you need help?
Like the health care sector, don’t overburden the system.
The Consumer Financial Protection Bureau cautions, “Don’t call your mortgage servicer if you aren’t facing an immediate issue. Mortgage servicers are getting a lot of calls and need to first help those who won’t be able to pay their mortgage.”
Critics have said this is where the CARES Act falls short – and exposes lenders to an unnecessary number of forbearance requests.
“The Act created an opportunity for millions of borrowers to stop paying their mortgage loans as long as they claim to have been economically impacted as a direct or indirect result of the Covid-19 crisis,” analyst Josh Rosner said. “The Act does not require any proof be furnished, and in fact, prohibits mortgage servicers from asking for any proof of such an economic hardship.”
That said, there are millions of Americans facing real economic hardship – with 3.3 million Americans filing for unemployment two weeks ago – and that pain will begin to be felt in the mortgage industry beginning this month.
If you are unable to pay any or part of your mortgage, the relief bill allows for forbearance. That means, basically, your mortgage is placed on pause for up to six months or longer, depending on how long the pandemic lasts.
Those seeking forbearance should …
Call Your Lender
Call volumes are reportedly heavy, so be ready to spend some time on this step. Your lender will be able to tell you if you are eligible for forbearance – or some other type of lender- or state-based relief.
Have your mortgage number handy when you call. You will want to explain why you’re unable to make your payment; how long you expect your situation to last; and provide them with details about income, expenses and other assets.
Be sure to ask questions to identify what solutions best for you. Ask them what options are available – including forbearance, loan modification or waiving of late fees. You can also ask whether your lender or state has options above and beyond the CARES Act.
Don’t know who services your mortgage? Click here to look it up.
Who Is Eligible For Forbearance?
The CARES Act only guarantees forbearance and a ban on foreclosure to anyone with a federally backed loan. Those federal agencies include:
- Fannie Mae
- Freddie Mac
- Veterans Affairs
- Federal Housing Administration
- Department of Agriculture
- Department of Housing and Urban Development
Mortgages that are not federally backed may not be eligible for forbearance and you will have to work with your lender for the best solution for you.
“This forbearance program creates further bifurcation in borrower outcomes as it applies to loans backed by the Federal Housing Authority Loans and the Government Sponsored Enterprises and it does not provide forbearance to borrowers whose loans are issued and owned by private lenders,” Rosner said.
Your lender will be able to tell you if your loan is federally insured.
Other Options
There are still options. States have announced their own forbearance programs, though details vary state by state.
In New Jersey, for example, Gov. Phil Murphy announced a 90-day forbearance program – but it will be up to the lenders to decide who is eligible on a case by case basis. New York’s plan does not include federally insured loans, which makes sense as those are already covered, and the lenders again decide what constitutes a hardship. In California, Gov. Gavin Newsom announced that four of the five major banks – all but Bank of America – agreed to a 90-day pause from collecting mortgage payments from those who can document economic hardship.
Individual lenders are offering a variety of programs and most vow to work with borrowers to help them through the pandemic. Check your lender’s website or give them a call to learn what options are available to you.
The Mortgage Bankers Association encourages you to contact your lender to learn more in this public service announcement:
You can also learn more at the Consumer Financial Protection Bureau’s website.