The government plans to support homeowners going through a difficult time financially due to the pandemic. It plans to do this by using the CARES Act. The act requires mortgage companies to provide borrowers forbearance of nothing less than 180 days. This forbearance is flexible in that, borrowers can request an additional 180 days or stop the forbearance at any moment. Any person affected either directly or indirectly by the Coronavirus pandemic qualifies for this program.
Forbearance is when a mortgage servicer allows a borrower to reduce the amount they pay for a limited time. Unlike loan forgiveness, forbearance does not erase what you owe. The borrower still pays these missed payments in the future. You’re advised to contact your service provider and plan to resume payments after the Covod-19 dust settles.
Different financial institutions offer different options for forbearance.
An example of this is Freddie Mac and Fannie Mae who are permitting lenders to offer modifications on loans. These modifications are for homeowners suffering from natural disasters.
Starting from March 18, occupied homes that have a federal mortgage won’t suffer a foreclosure, for 60 days, as per the CARES Act. Some state governments, such as those in New York and California have suspended foreclosures for 90 days.
How To Qualify For Mortgage Forbearance?
The forbearance program laid out in the CARES Act is for federally backed mortgages. However, there is a myriad of mortgage relief options available. These can be based on the state you live in or an independent/ private lender.
Who is Your Service Provider?
A mortgage servicer is an organization that receives your monthly mortgage payments.
The CARES Act outlines conditions necessary for protection. It depends on whether it's a federal mortgage or backed by the federal agencies listed below.
- United States department of housing (HUD) for short.
- The Department of Agriculture.
- USDA direct
- USDA Guaranteed
- The Federal Housing Administration (FHA) this may include reverse mortgages.
- The United States Department of Veterans Affairs (VA)
- Fannie Mae
- Freddie Mac
A borrower who can’t remember his mortgage servicer can look at their statement for the contacts. If they can’t get the information here, they’ll have to call their servicer.
Calling Your Servicer
There is a huge demand for people wanting to speak to mortgage servicers, so you may have to wait on the line for a while.
To avoid this, it is smart to check their website to see if the information you need is up there. Your account number should be readily available.
Be Ready to Explain Your Query
Be concise and precise. Honesty is important here as it will help them help you better. Make sure you also understand the merits and demerits. Here is a list of things you need to explain:
- Reason as to why you’re unable to make payments.
- Length of problem; permanent or temporary.
- Your financial details. These include income, expenses and other assets like cash in the bank.
- Your status as a member of the service having a permanent change of station order.
Mortgage Relief Programs Offered by Banks And Private Lenders
Most of the large mortgage lenders have announced programs to aid their customers affected financially by the ongoing pandemic. You can see some of these official announcements below.
You shouldn’t worry if your servicer isn’t among those shown below. There is not enough space to include all of them. Here, we only have a selection of the biggest ones. There is a good chance that your lender is working on a relief program. Get in touch with them and find out. The list includes:
- Bank of America
- Chase Bank
- Quicken Loans (includes rocket mortgage)
- Capital one
- PNC bank
- U. S bank
- Wells Fargo
Read The Agreement Carefully
We are hearing more and more of mortgage companies offering Coronavirus relief programs. Some of these offerings may have detrimental consequences down the road.
Some lenders are offering postponement of payment for up to 90 days.
They do this after agreeing with the servicer on a forbearance agreement. This doesn’t mean debt forgiveness, as interest continues to build. Some banks are even telling their customers that they may have to pay that money in bulk. Most customers can’t afford to do that.
Some servicers have offers that let the borrower pay higher monthly mortgages in future. This in accordance to the forbearance agreement. The customer should be keen since the payments might be quite high.
Borrowers should conduct adequate research to protect themselves. Every word from the servicer is not gospel truth, so research is key.
What If Government Isn’t Backing Your Mortgage?
If the government isn’t backing your mortgage, or one of the organizations listed above, contact your lender. Financial institutions such as the CFPB are encouraging lenders who may not able to meet payment obligations. The ongoing pandemic may have financially affected some of these borrowers.
State governments all over the country are implementing their own mortgage relief programs.
Examples of these are Suspension of foreclosures and assistance to homeowners. You can find more information on these programs on your state’s website.
Most servicers will advise you on the options best suited to your current needs.
Tips For Homebuyers
Here are a couple of things to take into account if you considering getting help:
Pay Your Mortgage If You Can
Mortgage servicers are receiving an increase in call traffic as a result of the Covid-19 crisis.
As a result of this, it’s advisable that if you can, pay for your mortgage. The servicers need to tend to those adversely affected. You should check their Web portal for available options.
Pay Off High-Interest Debt First
A clever tip is to eliminate high-interest rate debt first as this debt may severely hurt you in the future. Sometimes you may have to dip into your savings or emergency kitty to pay these debts. It is advisable that you do so to eliminate these debts.
Be cautious though, because this is your emergency kitty and you should have some money saved in case things continue to get worse during the pandemic.
In the likely case you don’t have savings you may want to consider the following methods:
- The snowball method – This method has you paying off your smallest debt first. It works like a reverse pyramid, where you go from smallest debt to largest. It is meant to psychologically boost you to pay all the debts by attaching a sense of accomplishment to it.
- Debt Avalanche – This method on the other hand emphasizes interest rates. Here you pay off your interest rates from highest to lowest ignoring the balance. By doing this you lower the applicable interest amount as time goes on.
- Debt snowflake – This method applies a one-time payment towards the reduction or elimination of the debt.
In Case of Job-Loss, Apply For Unemployment Benefits
The CARES Act is not the only program meant to look after Americans in case of unemployment. The others include:
- The Families First Act
- Extended Benefit Program
- Unemployment Compensation.
In most states, if you meet the eligibility criteria, you’ll receive unemployment benefits for up to 26 weeks.
Some states including; Arkansas, Idaho, Kansas, North Caroline, Missouri, Alabama, South Carolina, Florida and Georgia provide less than the 26 weeks. Others like the state of Montana provide 28 weeks.
The U. S Department of labor has expanded the guidelines on unemployment benefits and guidelines on insurance. There are 3 situations that states can change the flexibility of their program to help people affected by Coronavirus. They include:
- Someone self-isolating and is expecting to go back to work after quarantine ends.
- An organization or individual halting operations as a result of the coronavirus. They either, stop coming to work or staff can’t report to work due to the Coronavirus outbreak.
- Individuals leaving their work places owing to the risk of infection or care for family who may have the virus.
Cut Down Expenses Where Possible
Due to the uncertainty of the times, now is not the time to be making unnecessary purchases. There is a big risk of losing a job or getting furloughed. Therefore, every penny is vital.
This means cutting off subscription services such as gym membership and extra purchases to save that extra money.