What To Do If You Can't Pay Your Mortgage During the Coronavirus Crisis
The CARES Act eases the financial burden on homeowners with government-backed loans. Homeowners with these loans and have lost income due to the COVID-19 can suspend mortgage payments for up to 12 months. This law also pauses foreclosures, foreclosure-related evictions, and changes credit reporting during the health crisis.
In the mortgage industry, we call "pausing payments" forbearance. Read on to learn how you may benefit from the CARES Act.
The CARES Act and Your Mortgage
The new law only applies to mortgages that are:
- Backed by the Federal Housing Administration (FHA)
- Included under sec. 255 of the National Housing Act
- Included in sec. 184/184A of the Housing and Community Development Act of 1992
- Backed by the Department of Veterans Affairs (VA)
- Backed by the Department of Agriculture (USDA)
- Held by the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation
About Forbearance under the CARES Act
The CARES Act states that if you are experiencing financial hardship due to Coronavirus, you can pause payments for up to 180 days plus have the option to extend it for another 180 days.
If you're a landlord of a multifamily property (5+ units), you have similar protection. You can pause payments for 30-days plus request additional two 30-day extensions.
How to Request Forbearance
To pause your payments, you'll need to submit a request to your servicer --that is, the lender you make mortgage payments to. Within the application, you'll need to affirm that the hardship is due to COVID-19. Note that no further proof is required.
The rules for landlords are a bit different. Your payments must be current as of Feb. 1, 2020, to qualify.
What Happens During Your Forbearance
During the forbearance period, you won't be charged any penalties, interest, or fees that you would have been charged had you made your mortgage payment as usual.
Landlords may also not charge their tenants any late rent fees during the forbearance period granted to the landlord.
No Reporting to Credit Bureaus
The CARES Act also states that lenders shall not report late or missed payments to the credit bureaus if your mortgage is in one of the forbearance programs.
This rule applies through July 25, 2020, or 120 days after the end of the crisis period, whichever is later.
No Foreclosures or Evictions
The CARES Act also protects from eviction. Your loan servicer cannot initiate a foreclosure or foreclosure-related eviction action before May 17, 2020.
Additionally, landlords cannot evict renters during their forbearance.
What If Your Loan Is Not Non-Government Backed?
Many non-government-backed lenders have adopted policies to assist during this crisis period. To find out, you'll need to contact your lender directly.
Don't Just Stop Paying Your Mortgage
Whether your loan is from a private lender or government-backed, never abruptly stop making payments. If you stop making payments and your loan is not in forbearance, you could damage your credit and be subject to fees. In the worst-case scenario, you could face foreclosure and eviction.
Another option, one that is long term, is to refinance your current loan. The feds have also provided relief in the form of lowering interest rates, which has also dropped mortgage rates. Contact us today to see how much you can save by refinancing your current loan!