If you’re among those financially impacted by the coronavirus pandemic, you might be concerned about how to pay your mortgage or rent. Federal and state governments have announced plans to help struggling homeowners during this time. Read this to get information on what to do now, and what your options are for mortgage and rental relief.
Important things to know first
For many homeowners with mortgages, there’s help, but first assess your situation.
If you can pay your mortgage, pay your mortgage.
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. Check their website first for possible options.
If you can’t pay your mortgage, or can only pay a portion, contact your mortgage servicer immediately.
It may take a while to get a loan servicer on the phone. Loan servicers are experiencing a high call volume and may also be impacted by the pandemic.
A new federal law, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, puts in place two protections for homeowners with federally backed mortgages:
- A foreclosure moratorium
- A right to forbearance for homeowners who are experiencing a financial hardship due to the COVID-19 emergency
If you don’t have a federally backed mortgage, you still may have relief options through your mortgage servicer or from your state.
Keep reading as we’ll first explain what the different options mean. Then we’ll explain how you can figure out if your lender or servicer can offer you any of the forms of assistance available.
Major mortgage relief options during the coronavirus pandemic
Mortgage forbearance
Forbearance is when your mortgage servicer or lender allows you to pause or reduce your mortgage payments for a limited period of time. Forbearance doesn’t erase what you owe – you’ll have to repay any missed or reduced payments in the future. If your income is restored, reach out to your servicer and resume making payments as soon as you can.
Depending on the kind of loan you have, there may be different forbearance options. If this option is available to you, read;
What is mortgage forbearance?
Forbearance is when your mortgage servicer or lender allows you to temporarily pay your mortgage at a lower payment or pause paying your mortgage. You will have to pay the payment reduction or the paused payments back later.
Forbearance can help you deal with a hardship, such as, if your home was damaged in a flood, you had an illness or injury that increased your healthcare costs, or you lost your job. Forbearance does not erase the amount you owe on your mortgage. You will have to repay any missed or reduced payments.
How to request a forbearance
Call your servicer and let them know your situation immediately. Ask them what “forbearance” or “hardship” options may be available.
Some servicers will require that you request forbearance or other assistance within a certain amount of time after a disaster or other qualifying event.
Mortgage forbearance options
Forbearance is complicated. There isn’t a “one size fits all” because the options depend on many factors. Those factors include:
- The type of loan
- The owner or investor requirements in your mortgage loan
- Your servicer
There are key things to consider with each type of forbearance. You’ll want to pay close attention to how your servicer expects you to pay back any missed or reduced mortgage payments.
Here are some forbearance examples to guide you
Paused Payments Option-Paid During Existing Mortgage: Your servicer allows you to stop making payments for six months, but you must pay everything back at once when your payments are due again.
What to consider:
- You may owe a big bill that comes due all at once. For example, if your servicer allowed you not to pay your mortgage for six months, at the end of the forbearance period, you may owe all six of your missed mortgage payments in one month.
- Interest on the paused amounts will continue to accrue until you repay them.
Mortgage Payment Reduction Option: Your servicer allows you to reduce your $1,000 monthly mortgage payment by half for three months. After the three months are over you have one year to pay back the amount of that reduction.
What to consider:
- The amount of the reduction would be spread out over 12 months and added to your mortgage payment once the reduction period is over. This means your monthly mortgage will increase during that one-year period. Using the example above, you would pay $500 for three months and starting on the fourth month you would need to pay $1125.00 ($1,000 + $1500/12) each month for the next 12 months.
- Interest on any reduced amounts will continue to accrue until you repay them.
Paused Payment Option-Paid back at End of Mortgage: Your servicer allows you to pause payments for one year, and that amount is repaid by either adding it to the end of your mortgage loan or by you taking out a separate loan.
What to consider:
- You can extend the term of your loan for some amount of time to pay back the paused payments or take out a separate loan.
- Extending your loan means the missed payments will be added on to the end of your loan. For example if you were given a twelve month period where you didn’t have to pay your mortgage, you’ll have twelve months of payments added on to the date when your loan was supposed to be paid off by.
- Extending with a separate loan means when your mortgage is due you’ll also have to pay off this separate loan. This is like a balloon payment, which is one large payment due at the end of your loan.
- Interest on the missed amounts will continue to accrue until you repay them.
Moratoriums suspend or stop foreclosure
Foreclosure is when the lender takes back the property after the homeowner fails to make required payments on a mortgage. Foreclosure processes differ by state.
How does foreclosure work?
Foreclosure processes differ by state. They are generally done in two ways. If done by filing a lawsuit, it is called “judicial foreclosure.” In some states, the lender can foreclose without going to court, and that is called “non-judicial foreclosure.” State foreclosure processes require that the borrower(s) be notified regarding the foreclosure proceedings. There are also other federal rules that may apply.
Foreclosure is when the lender takes back property when the homeowner fails to make payments on a mortgage. Foreclosure processes differ by state.
Typically, if you fall a few months behind on your mortgage payments, the foreclosure process may begin (although the process can begin earlier or later). Don’t wait for the foreclosure process to begin. Reach out for help as soon as you think you might have trouble paying your mortgage.
The foreclosure process generally may proceed in one of these ways depending on your state:
- Judicial foreclosure. This requires that the process go through a court where the borrower can raise defenses.
- Non-judicial foreclosure. This is done without filing a court action and is carried out by a series of steps, including required written notices under a “power of sale” clause in the mortgage or deed of trust.
Foreclosure processes require that the borrower(s) be notified regarding the proceedings and generally involve giving public notice. State laws on giving notice and scheduling a foreclosure sale vary. Some states may also provide you with the right to mediation prior to foreclosure. Be sure to read your mail and any legal notices carefully and act promptly on notices you receive.
What options do you qualify for?
Your mortgage relief options depend on who owns or backs your mortgage. Here we’ll explain how to find out what you qualify for.
First, figure out who services your mortgage. This is who you need to contact.
HOW TO REQUEST FORBEARANCE OR OTHER MORTGAGE RELIEF
Call your servicer.
It may take a while to get a loan servicer on the phone. Loan servicers are experiencing a high call volume and may also be impacted by the pandemic.
Have your account number handy.
Your mortgage servicer is the company that you send your mortgage payments to each month.
If you don’t know or can’t remember who currently services your mortgage, there are several ways to find out, including looking at your mortgage statement for contact information.
Second, figure out if your mortgage is federally backed.
To be eligible for protections under the CARES Act your mortgage must be federally owned or otherwise backed by one of the federal agencies and entities listed below. If you don’t know who owns or backs your mortgage, you can call your servicer. The servicer has an obligation to provide you, to the best of its knowledge, the name, address, and telephone number of who owns your loan.
Nearly half of the nation’s mortgages are owned or backed by Fannie Mae or Freddie Mac.
To look up online whether your mortgage is owned or backed by Fannie or Freddie, click these links:
- Is my loan backed by Fannie Mae ?
- Is my loan backed by Freddie Mac ?
CARES Act Relief Options
If you can’t make your mortgage payments because of the coronavirus, start by understanding your options and reaching out for help.
If your mortgage is a federally backed mortgage, you have two mortgage relief options under the CARES Act:
- First, your lender or loan servicer may not foreclose on you for 60 days after March 18, 2020. Specifically, the CARES Act prohibits lenders and servicers from beginning a judicial or non-judicial foreclosure against you, or from finalizing a foreclosure judgment or sale, during this period of time.
- Second, if you experience financial hardship due to the coronavirus pandemic, you have a right to request a forbearance for up to 180 days. You also have the right to request one extension for another up to 180 days. You must contact your loan servicer to request this forbearance. There will be no additional fees, penalties or additional interest (beyond scheduled amounts) added to your account. You do not need to submit additional documentation to qualify other than your claim to have a pandemic-related financial hardship.
If your mortgage is backed by Fannie Mae or Freddie Mac
In addition to the foreclosure moratorium and forbearance, if you are granted forbearance to delay making your monthly payments during this temporary period:
- You won’t incur late fees
- You won’t have delinquencies reported to credit reporting companies
- Foreclosure and other legal proceedings will be suspended
Borrowers with a mortgage not backed by the federal government
If you have a mortgage loan that is not backed by one of the federal agencies or entities listed above, contact your servicer. The CFPB and other financial regulators have encouraged financial institutions to work with borrowers who are or may be unable to meet their obligations because of the effects of COVID-19.
Your servicer should help you identify alternatives that may be available to you given your specific circumstances.
Your state may also offer additional mortgage relief options
Many states are implementing or considering various mortgage relief options, including the suspension of foreclosures, as well as additional assistance for homeowners. Check your state’s government website for details.
How to request forbearance or mortgage relief
Call your servicer
You may have to wait on the line for a while to speak to your mortgage servicer because there are a lot of people in need right now. Be prepared with the following information and questions you want to ask and check their website before you call to see if there is a list provided of information you may need. Have your account number handy.
You may need to explain
- Why you’re unable to make your payment
- Whether the problem is temporary or permanent
- Details about your income, expenses and other assets, like cash in the bank
- Whether you’re a servicemember with permanent change of station (PCS) orders
Questions to ask
- What options are available to help you temporarily reduce or suspend my payments?
- Are there forbearance, loan modification, or other options?
- Can you waive late fees?
Get it in writing
Once you’re able to secure forbearance or another mortgage relief option, ask your servicer to provide written documentation that confirms the details of your agreement and that you’re clear on what the terms are. With some forbearance programs, you may owe all of your missed payments at one time, or additional payments at the end of the mortgage might be required, so make sure you’re familiar with the final terms.
What to do once you’ve received a mortgage relief option
While you’re in the forbearance period, or working under another mortgage relief option, there are a number of things to do to continue to protect yourself. This advice applies to both a CARES Act forbearance and other mortgage relief that you might receive.
- Keep written documentation on hand. You want to make sure that you have this documentation available in case there are any errors on your monthly mortgage statements to ensure that your statement reflects the assistance provided.
- Pay attention to your monthly mortgage statement. Continue monitoring your monthly mortgage statements to make sure you don’t see any errors.
- Keep an eye on your credit. It’s a good idea to routinely check your credit reports in order to make sure there are no errors or inaccuracies. If you stop making mortgage payments without a forbearance agreement, the servicer will report this information to the credit reporting companies, and it can have a lasting negative impact on your credit history. If an error has been made, however, you can work to dispute it. Get more information about credit reporting and coronavirus.
- Once your income is restored, contact your servicer and resume your payments. With forbearance, you still owe the payments that you missed, but fewer missed payments mean you’ll owe less down the road.
- If you’re continuing to receive some income that turns out to be more than you need for your bills and expenses (including anything you keep paying on your mortgage), consider putting the extra money away so you can use it to pay off what’s needed later. If you can save any money now, it’ll be helpful when payments are due later.
Be aware of scams
Scammers often take advantage of vulnerable consumers during disasters and financial shocks. In addition to coronavirus-related scams, be aware of scams that falsely promise financial relief from your mortgage loan, or from foreclosure.
Here’s what to watch for as scammers may:
- Charge a high up-front fee for their services
- Promise to get you a loan modification
- Ask you to sign over your property title
- Ask you to sign papers you don’t understand
- Tell you to make payments to someone other than your servicer
- Tell you to stop making payments altogether
- Promise you payments in connection with providing credit card numbers and other personal information
Protections for renters
If you are renting from an owner who has a federally backed mortgage, the CARES Act provides for a suspension or moratorium on evictions. If your landlord has a federally backed mortgage or multi-family mortgage, you cannot be evicted for nonpayment of rent for 120 days beginning on March 27, 2020, the effective date of the CARES Act. After the 120-day period is up, the landlord cannot require you, the tenant, to vacate until providing you with a thirty-day notice to vacate.
If the property you rent isn’t covered by the CARES Act, many states have suspended all evictions and foreclosures due to the pandemic. Check the websites of your state government, state court , or legal aid program for details and updates.
Where to get additional help
If you need help working with your servicer or understanding your options you may want to reach out to a professional to help you with your specific situation.
- HUD-Approved Housing Counselors. The U.S. Department of Housing and Urban Development (HUD)-approved housing counselors can discuss options with you if you’re having trouble paying your mortgage loan or reverse mortgage loan. This may also include forbearance or a modified payment program.
- Credit Counselors. Reputable credit counseling organizations are generally non-profit organizations that can advise you on your money and debts, and help you with a budget. Some may also help you negotiate with creditors. There are specific questions to ask to help you find a credit counseling organization to work with.