Mortgage Relief During the Coronavirus Pandemic

According to the U.S. Department of Labor’s U.S. Bureau of Labor Statistics, as of May 8, 2020, 20.5 million Americans were unemployed as a result of the coronavirus pandemic.

That’s approximately 14.7 percent of the U.S. working population, a huge amount to be sure.

The numbers really aren’t a surprise, especially to the various levels of government which have mandated the closures of many businesses, directly resulting in these dismal unemployment numbers.

As a result, the federal government has stepped up with fiscal efforts to assist those out of work as a result of these local and state lockdowns.

• A 13-week extension to unemployment benefits
• An additional $600 per week in unemployment payments – through July 31
• A $1,200 stimulus payment to most adults with $500 per child
• Forgivable loans to small and medium-sized businesses to keep workers on payrolls
• Federal student loan payment suspensions through September, 30

Many of these were highly publicized due to the wide-reach financial relief efforts have across the U.S. population.

One effort, however, hasn’t been as widely communicated, but may greatly benefit those in need.

That less-publicized effort is mortgage relief.

Federal Mortgage Relief

A provision in the CARES Act allows borrowers whose mortgage loans are federally backed (Fannie Mae, Freddie Mac, FHA/VA, USDA…most mortgages, actually) to initially miss payments for up to 90 days, followed by an extension of up to one year total if application is made.

In the lending arena, this is called forbearance.

And, as of May 8, 2020, approximately 4.1 million homeowners had requested and received forbearance from their mortgage lenders.

If you’re having difficulty making your mortgage payment due to coronavirus, a call to your mortgage lender should be all that’s needed to request the initial 90-day forbearance on your account.

This does not mean you won’t owe those missed mortgage payments.

And, there’s some confusion with regard to how those missed payment will be made up.

This is a result of limited guidance, initially, from the federal government with regard to how the legislative language was to be implemented.

There are reports of some mortgage lenders telling those requesting forbearance they will need to make up all three missed payments, as well as pay the month-four payment, in one lump payment.

Which is ridiculous. For most Americans, coming up with three months of mortgage payments during that period of time is an impossibility, even if unemployment wasn’t a factor.

Luckily, most banks have taken the initiative to offer:

• Adding missed payments to the end of the mortgage
• Allowing repayment to be made when a property is sold

Other repayment options may include adding additional amounts to your regular monthly payments over a set number of months, and, if possible, by making a lump sum payment at the end of the forbearance period.

Just be aware, a lump sum payment at the end of your initial forbearance is not your only option, even if your lender initially makes it sound that way.

A cordial discussion at the time you request forbearance concerning all repayment options is the best route to go.

If you’d like to read more about the CARES Act mortgage relief provision and options, you can do so at the Consumer Financial Protection Bureau’s website here.

And a final, very important point with regard to mortgage forbearance…if you don’t truly need the relief, don’t request it.

No Free Ride

This isn’t free money for the taking.

In fact, while the federal government has implemented this relief provision for borrowers, it has done nothing for financial institutions.

It’s likely unknown to most that financial institutions (mortgage servicers) often package their mortgages and sell them in the form of bonds to investors. The mortgage services are then required to pay bondholders from the mortgage payments they receive. Even though borrowers can take a break from payments, mortgage servicers are still on the hook for the full payments to bondholders.

If forbearance continues on too many mortgages for a long period of time, mortgage servicers may become the next entity in need of financial help.

Which is why it is important that only borrowers truly facing financial hardship apply for forbearance.

Wrap Up

A significant number of Americans are out of work as a result of the coronavirus pandemic and governments’ efforts to stem its spread.

The unemployment numbers very well may increase in the coming months as layoffs become less about the virus itself and more about the resulting economic downturn that’s been created.

Fortunately, the federal government has implemented a number of fiscal measures to help those in need, one of which includes mortgage relief.

A request to your lender of forbearance will allow you to remain in your home, missing mortgage payments for up to a year, until you can regain your financial footing.

A number of repayment options are available, and a discussion with your lender should provide the best plan for you.

It’s vital, however, to only take advantage of mortgage relief if you absolutely have no other option.

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