Buzz
Your home is likely one of your largest monthly costs. If you have a mortgage that could stretch for the next 10, 15, or even 30 years, the uncertainty caused by the coronavirus pandemic may be making you anxious about how to stay on top of your payments.
While the CARES Act, passed in late March to provide relief during the pandemic, offers assistance for certain mortgages, it doesn’t offer a universal solution for all homeowners.
Let’s examine the options available for your mortgage, then go through the steps you should take based on your unique situation.
Options Available for Mortgages Backed by the Federal Government
The relief measures introduced by the coronavirus legislation provide two key protections for homeowners with mortgages supported by the federal government:
Foreclosure actions are suspended for a period of 60 days starting March 18, 2020. During this time, no foreclosure proceedings can begin or be completed, and residents of homes insured by the Federal Housing Administration cannot be evicted.
Homeowners who are facing financial difficulty due to the pandemic may be eligible for mortgage forbearance, which temporarily halts mortgage payments for up to 180 days. An additional 180-day extension is available if requested. To request forbearance, you must contact your loan servicer, and they are prohibited from charging extra fees or interest beyond what would normally accrue during the forbearance period.
If your mortgage is managed by any of the following entities, it is considered federally backed:
Fannie Mae
Freddie Mac
U.S. Department of Housing and Urban Development (HUD)
U.S. Department of Agriculture
Federal Housing Administration
U.S. Department of Veterans Affairs
If you're unsure about the owner of your mortgage, you might be able to find out through the Consumer Financial Protection Bureau.
Options for Mortgages Not Backed by the Federal Government
If your loan isn't backed by a federal agency, you're at the mercy of your lender's decisions. Fortunately, many financial institutions have stated they are offering customized support to customers affected by the pandemic on an individual basis.
Beatrice de Jong, a consumer trends expert at Opendoor, stated, “You will need to repay the suspended or reduced payments later, either with a higher monthly payment or a lump sum. The available plans vary by bank and location, so it's crucial to contact your loan provider to find out what options are available to you.”
Below are some important questions you should ask your lender.
Reach out early and remain patient
Some lenders have introduced online forms for requesting payment relief due to the pandemic. If your lender hasn’t, you will need to make a phone call.
"The sooner you reach out to your mortgage lender, the more time you’ll have to explore your options," advises Diane Hughes, Senior Vice President and Director of Mortgage at UMB Bank. "Be ready to discuss your employment status, what you can afford to pay, and when you expect to resume regular payments."
The CFPB suggests having your mortgage account number and other financial information on hand when calling:
You might need to clarify
Reasons why you're unable to process your payment
Is the issue something that will last or is it just a short-term setback?
Information regarding your income, financial obligations, and any other assets, such as your bank balance
Are you a member of the military with permanent change of station (PCS) orders?
Key questions you should be asking
What options exist to temporarily reduce or suspend my payments?
Are forbearance, loan modification, or any other alternatives available?
Is it possible to have late fees waived?
Several factors are contributing to the extended wait times when calling your loan servicer. The nationwide impact of the pandemic means that customer service teams, which may be adjusting to remote work, are handling a higher volume of inquiries. Additionally, federal and state-level measures to assist homeowners during the crisis have introduced further complexity to each case.
Remember a few weeks ago when interest rates dropped and there was a rush to refinance mortgages? Lenders are still processing those applications, along with the ongoing demand for refinancing opportunities, as de Jong points out.
“Since waiting to speak with a loan servicer can take a significant amount of time, it’s important to contact your mortgage servicer right away—at the moment you realize you won’t be able to pay your mortgage or can only pay a partial amount,” says Hughes.
Clarify the specifics
After reaching an agreement with your loan servicer, ensure that you receive a written confirmation in case of any discrepancies with your account later. It’s crucial to carefully review your monthly account statements for accuracy and stay alert for any communications from your lender regarding potential changes or adjustments to their policies.
Once you’re back on stable financial footing, the CFPB advises contacting your servicer again and resuming your payments as soon as possible. Even if you’re allowed to remain in forbearance for a few months, resuming payments will reduce the total amount you’ll pay on your mortgage later, as interest continues to accrue during the forbearance period.
