Local mortgage experts say homeowners who can’t pay their mortgage because they’ve lost income due to COVID-19 have several options for mortgage relief — but you have to ask.
“If you need help, ask for help,” says Lisa Peters, branch manager for the Sherry Lane branch of Caliber Home Loans. “There are a lot of options, so there is no one cookie cutter solution for everybody.”
Mortgage Relief Options
- Forbearance: Forbearance lets you “pause” payments for a set period of time, in this case a minimum of 90 days. Your loan continues to gain interest during this period. The skipped payments are due after 90 days unless further extended. In some cases, a lender may let you spread those skipped payments out over a few months.
- Deferment: Deferment also allows you to skip payments, and in some cases pause your accruing interest as well for well-qualified borrowers. With deferment, your payments may be due at the end of 90 days or tacked onto the end of your loan.
- Loan modification: Applying for loan modification offers you the chance to change the terms of your loan. With this option, you could extend your loan term or lower your interest rate to help reduce the cost of your monthly payments.
- Refinancing: A refinance can extend your loan term, offer a cash-out refinance from your equity, or take advantage of record-low interest rates. Refinancing has closing costs involved, though you can roll them into the loan balance, and you must qualify. With economic volatility, your portfolio may not qualify you for a prime rate.
If you find yourself cash-strapped from loss of income, dig out your mortgage statement and reach out to your loan servicer that collects monthly payments and manages your account (not the lender, an important distinction).
Mortgage lenders, loan servicers, and banks are seeing the unprecedented fallout from Coronavirus unfold daily and are being proactive in helping customers.
Hayden Hodges, mortgage loan officer with the Cole Avenue branch of U.S. Bank said they’ve reached out to customers to let them know the 800 number for the loan servicing department, which can walk homeowners through their options.
“The big word right now is forbearance,” Hodges says. “For a minimum of 90 days, their payments are suspended so they don’t need to make a payment. They won’t be charged for a late fee during that time and the credit bureau will reflect their account as current.”
At Coppell-based Caliber Home Loans, they processed 3,200 forbearance plans just last week and are experiencing very high call volumes.
“If you need mortgage relief, apply early and know that people on the other end of the line are just bombarded right now,” Peters says. “Be patient in getting through, but don’t wait until you’re past due.”
If you’re about to close on a property, Hodges recommends having a back-up lender in case financing falls through. “They might want to insure themselves by getting pre-approved with another lender just in case your current lender isn’t able to deliver in the final hour,” Hodges says. “All it costs is your time.”
You can also request forbearance for federal student loans. The Department of Education announced on March 20 that it would suspend interest payments on student loans until Sept. 30.
Help at the Federal Level
The Coronavirus Aid, Relief, and Economic Security (CARES) Act is a package of measures introduced in the U.S. Senate in March of 2020 in response to the COVID-19 pandemic.
In the CARES act, payments for mortgage loans backed by the federal government may be paused for up to 180 days with the option to extend for another 180 days.
That’s in addition to a moratorium on foreclosures for homeowners with Fannie Mae or Freddie Mac-backed mortgages, which account for the majority of single-family homes. Federal Housing Administration (FHA) has implemented an immediate foreclosure and eviction moratorium for single family homeowners with FHA-insured mortgages for the next 60 days. FHA loans and public housing residents account for more than 9 million households.
Fannie Mae and Freddie Mac are guarantors on the majority of mortgages, which they buy and bundle into bonds called mortgage-backed securities. Most mortgages fall into this category, as 97.7 percent of mortgage securities were issued by the agencies so far in 2020, according to the Urban Institute.
“This means if you have a mortgage, it was mostly likely sold to Freddie or Fannie and thus the foreclosure moratorium and payment relief likely applies to you,” Curbed explains. “Homeowners who don’t have mortgages backed by Freddie or Fannie are likely to be subprime borrowers, condo owners, or owners of particularly expensive housing.”
Banks Helping Consumers
Banks are responding to the crisis as well. Bank of America announced it is offering relief to consumers and small business owners experiencing hardship because of the Coronavirus, offering clients three-month mortgage deferral on loans and other consumer protections. It will be done on a case-by-case basis and the payments would then be added to the end of their loan.
Other banks have been proactive in offering help to customers: US Bank, Chase Home Lending, Wells Fargo, CITI, Capital One, and others are offering customers who are struggling financially a 90-day payment forbearance, with no related late fees and no negative impact on their credit reports as a result of deferring payment.
Evictions and Foreclosures on Hold
With a record 3.3 million people filing for unemployment — a staggering number considering the previous record was 695,000 in 1982, according to a recent Labor Department report — many Americans will need drastic help.
Cities and states throughout the United States, including New York, California, Los Angeles, San Francisco, and Miami are telling worried citizens they’re putting a halt on evictions for now. The Department of Housing and Urban Development (HUD) said it’s suspending all evictions and foreclosures until the end of April.
Specifically in Texas, the Texas Supreme Court issued an order stopping eviction proceedings until April 19 and may be extended beyond that. There are exceptions for criminal activity or if the tenants “pose an imminent physical threat.”
Mortgage Relief Action Plan
- If you suffer a hardship related to COVID-19, prepare to ask for a mortgage relief plan.
- Pull out your mortgage statement and find the number to reach your mortgage loan servicer. The lender who originated the loan may not be the same entity that collects payments monthly.
- Be patient. Call volumes at banks and lenders are very high right now, so it may take some time to get through.
- Inquire about your various options for mortgage relief, including deferment, forbearance, loan modification, or even refinance if you’re seeking a smaller monthly payment. There’s no one size fits all solution, so inquire with professionals.