We live in unprecedented times, impacting not just the mortgage industry, but entire humanity.
We are tied to our homes, with limited mobility, and no certainty around when that will change.
Survival and safety is key at the moment, with all other aspects of our lives taking a backseat. From our jobs to leisure activity, from social gatherings to essential ones. Everything has just come to a standstill.
With jobs at risk and not a lot of certainty about when all of this is going to return to normal, a lot of people are concerned about their finances. Especially when many among us are heavily dependent on credit to live our lives: mortgages, auto loans, education loans, personal loans, credit card loans – you name it.
That’s the story of many consumers worried about job losses: “What options are available to me? What can ease some of the financial distress related to the loan payments I'll still have to make?”
Are there options to help me with the mortgage payment?
Mortgage payment is one of the biggest monthly expenses most families have. And now with people losing jobs, affording monthly mortgage payments can become a significant barrier to cross for many.
In these trying times, the Federal Government is doing a lot to help the citizens. There are plenty of programs that are being offered by different agencies of the government. But there are also caveats associated with them. Our motive here is to not only help inform you about your options, but also caution you about the potential downsides of using one of those options.
We list the prominent COVID-19 associated mortgage relief programs and highlight the pros and cons of each.
Forbearance Program – The payment relief program
Extraordinary times require extraordinary measures. And that’s exactly what the government and its agencies are trying to do. One such program by the FHFA (Federal Housing and Finance Agency) is the “Forbearance program”. Under this program, if you loan is federally-backed, you can:
- Contact your mortgage servicer and request a reduction (or suspension) of mortgage payments for six months. This can be extended by another six months, if necessary for up to 12 months .
- Request for a late fee relief during the forbearance period.
- While this gives you temporary relief until things stabilize and return to normal, it also offers a repayment plan to help you catch up to your scheduled payments gradually, and in some cases, offers permanent loan modification.
A few words of caution:
- People can benefit significantly from this program. But there is a catch. Remember that this program only allows you to delay your payments. Your interest will accrue as usual. You will have to catch up to all your payments eventually. Either by extending the term of the loan, or by making higher monthly payments along the way. So please use it only if you absolutely have no other way.
- Do not stop making your payments without having worked out some kind of a plan with your loan servicer. You will be considered delinquent on your payments if you do so.
- Watch out for mortgage scams. Please contact your loan servicer yourself and do not reply to emails or calls. There are a lot of hoax emails and phone calls, claiming to help you.
Learn more about Fannie Mae's COVID-19 Assistance – Forbearance Program.
Freddie Mac COVID-19 Response
Freddie Mac is assisting mortgage borrowers by:
- Providing mortgage forbearance for up to 12 months.
- Waiving assessments of penalties and late fees.
- Halting all foreclosure sales and evictions of borrowers living in Freddie Mac-owned homes until at least May 17, 2020,
- Suspending reporting to credit bureaus of delinquency related to forbearance,
- Offering loan modification options that lower payments or keep payments the same after the forbearance period.
Learn more at Freddie Mac's COVID-19 Response page.
Freddie Mac and Fannie Mae are both government-sponsored enterprises. So similar words of caution apply for Freddie Mac-owned mortgages as well:
- Make your mortgage payment if you can.
- Don’t stop paying without informing your loan servicer.
- Beware of scams.
Eviction and Foreclosure Moratorium
An eviction and foreclosure moratorium went into effect on March 18 for 60 days. During that time,
Homeowners:
- Will not be charged late fees.
- Will not be evicted from their homes.
Lenders:
- Will not initiate foreclosure proceedings.
- Will suspend foreclosure proceedings already in process.
This one really does not have a downside to it. This one is for your information, mainly to prevent abuse from lenders and services.
Paycheck Protection Program (PPP)
This is a program offered by the Small Business Administration (SBA). PPP is a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll. Under the terms of the program:
- SBA will forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities.
- You can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating.
- Lenders may begin processing loan applications as soon as April 3, 2020. The Paycheck Protection Program will be available through June 30, 2020.
If you own a small business, you may be able to take advantage of this opportunity to protect your employees and keep them on their payroll.
Learn more about the Paycheck Protection Program here.
Disaster Response Network for Homeowners & Renters
This network is run by Fannie Mae as well and offers free help with broader financial challenges caused by COVID-19. Its HUD-approved housing counselors can:
- Create a personalized action plan
- Offer financial coaching and budgeting.
- Support your ongoing success for up to 18 months.
If you are a homeowner, you can access the Loan Lookup Tool offered by Fannie Mae.
If you are a renter, contact your property manager or building owner to see if you have access to Fannie Mae’s Disaster Response Network. This option is available only for tenants living in apartments or other multifamily rental properties financed by Fannie Mae.
Read more about these programs at the COVID-19 assistance page created by Fannie Mae.
HOPWA program of the HUD
HOPWA program offered by HUD (Housing and Urban Development) is organizing a webinar on April 13th, 2020 at 1:00 PM EDT to provide more information on COVID-19 response. You can register for the HOPWA webinar at HUD’s website.
Appraisal alternatives
If you are purchasing a home and are concerned about appraisal, this should likely benefit you. On March 23, 2020, Fannie Mae and Freddie Mac issued letters talking about the impact of COVID-19 on Appraisals. Under the guidance, lenders will be allowed to use desktop appraisal and exterior only appraisals for purchase transactions through May 17, 2020. Fannie Mae has instructed appraisers to accommodate the revised scope of work and document a statement of assumptions and limiting conditions.
For more information, you can read Fannie Mae Appraisal Alternatives and Freddie Mac Appraisal alternatives
Keep calm and stay hopeful
These are difficult times we live in. But like every other calamity that mankind has faced, we’ll come out of this fine. Hold your hands together and stay optimistic. We are all too resilient to let this bog us down for too long.
At Stem Lending, our goal is to help you with your mortgage. If there’s guidance you are looking for regarding your home loan, please do reach out. We’ll help you to the best we can.
Useful Resources:
- CFPB coronavirus mortgage relief options.
- Forbearance program.
- Federal Housing Finance Agency Mortgage Assistance FAQs.
- Fannie Mae – Know Your Options.
- Fannie Mae’s Loan Lookup Tool.
- COVID-19 assistance page.
- Freddie Mac’s My Home program.
- Fannie Mae Appraisal Alternatives.
- Freddie Mac Appraisal alternatives.
- FHFA – Beware of Scams.
- Paycheck Protection Program.