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Mortgage Forbearance

As the coronavirus pandemic continues to roll across the U.S., keeping many individuals in semi-isolation, millions are already out of work for the foreseeable future and others are likely to become so. How will those suddenly without income be able to keep a roof over their heads?

The federal government and individual states are stepping in to provide protection for homeowners and renters. On the state level, some initiatives are specifically intended to provide relief to homeowners and tenants financially impacted by COVID-19, while others—such as judicial orders suspending nonemergency civil cases including evictions and foreclosures—are aimed at protecting court personnel and the public from contamination during face-to-face hearings. The orders and suspensions are temporary and mostly tied to the end of stay-at-home and shelter-in-place periods. The orders generally only prevent landlords and lenders from executing or moving forward with law enforcement actions or, less commonly, legal proceedings that would lead to eviction or foreclosure. Tenants and homeowners ultimately will still be responsible for making their rent and mortgage payments. Only a few jurisdictions have initiatives that go beyond temporary forbearance to potentially provide financial assistance to some homeowners and tenants.

Assessing the Borrower’s Situation:

As the Consumer Financial Protection Bureau (CFPB) advises on its coronavirus mortgage relief page, the first step for an affected mortgage borrower is to determine their individual situation:

  • If a borrower can pay their mortgage, then they should make the payment. If there’s not an immediate problem with paying the mortgage, it’s better for the borrower to start with the mortgage servicer’s website to see what COVID-19-specific information is available than it is to call, as the servicer is busy working with those who can’t pay this month.

  • If a borrower can’t pay their mortgage, or can only make a partial payment, then they should contact their mortgage servicer immediately, and be prepared for longer call wait times than normal.

When a lender offers any mortgage forbearance or payment deferral option, it’s important for the borrower to understand the terms under which any skipped payments will be made up after the forbearance period ends. These policies will vary by institution. For example, one lender may require the missed payment(s) to be made up as soon as regular payments resume, while another lender may add the missed payment(s) onto the end of the loan term.

Federal Mortgage Relief Programs

Federally Backed Mortgages:

Under the provisions of the CARES Act, individuals with federally backed mortgage loans who are experiencing financial hardship due to COVID-19 can request a forbearance period by contacting their mortgage servicer. Federally backed mortgages include FHA, VA, USDA, Fannie Mae and Freddie Mac.

The CARES Act provides for affected borrowers to defer their mortgage payments for up to 180 days. Borrowers also have the right to apply for an extension of another 180 days of forbearance. There will be no penalties or fees added to the account, although regular interest will still accrue. Borrowers must contact their mortgage loan servicers to initiate this forbearance. The Department of Housing and Urban Development (HUD) was ordered by President Trump on March 18 to suspend evictions and foreclosures for the next 60 days. The moratorium applies to single-family homeowners with mortgages insured by the Federal Housing Administration (FHA), a part of HUD that insures home loans made by FHA-approved lenders. The order not only prevents new foreclosure actions but also suspends all foreclosure actions currently in process. According to the CFPB, nearly half of all U.S. home mortgages are owned or backed by Fannie Mae or Freddie Mac.

The Federal Housing Finance Agency (FHFA), which oversees Fannie Mae, Freddie Mac, and the Federal Home Loan banks, is providing payment forbearance to borrowers impacted by the coronavirus for up to 12 months due to hardship. Penalties and late fees also are being waived. No delinquency related to forbearance will be reported to credit bureaus. Additional information is available from the FHFA’s page on mortgage help for homeowners impacted by COVID-19, from Freddie Mac’s coronavirus help page and from Fannie Mae’s coronavirus help page.

Additionally, Freddie Mac has implemented a program offering relief to multifamily landlords whose mortgages are financed with a Freddie Mac multifamily fully performing loan. Under this program, landlords can defer loan payments for 90 days by showing hardship due to COVID-19; in return, landlords are required not to evict any tenant based on nonpayment of rent during the forbearance period.

State Mortgage Relief Programs:

As of mid-April, all 50 states and the District of Columbia are implementing relief measures for homeowners affected by the COVID-19 pandemic. While most states are halting evictions and foreclosures during their respective state of emergency periods, mortgage and rent payments may still need to be made. These state-specific relief measures are in flux and will change over time.

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