How to Get Mortgage Relief During the Pandemic

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The COVID-19 pandemic has caused a rate of job losses that have not been seen since the Great Depression. Millions of jobs lost and businesses closed all around the country, and on top of that, the economic fallout is expected to hit the lower-income sector the most with recovery not expected in months or even years from now.

With sudden unemployment, paying the mortgage is just one of the many problems that Americans face. However, it’s one of the bills that cannot go unpaid due to the threat of homelessness. If you are currently facing this problem and can no longer afford your mortgage, here are some relief options that you might be eligible for:

Relief under the CARES Act

The Coronavirus Aid, Relief, and Economic Security (CARES) Act states that a homeowner with a federally-backed home loan who is currently facing financial hardship due to COVID-19 can get a forbearance on their mortgage. This is regardless of the homeowner’s delinquency status.

If you have a federally-backed mortgage program, you may apply for a forbearance period that will last up to 180 days and can be extended for another 180 days, given that you have experienced financial hardship due to the COVID-19 outbreak.

This law also halts foreclosures until March 31, 2021. Moreover, it prohibits negative credit reporting if a homeowner receives relief for their mortgage, as well as prevents charging of late fees, interest, and extra penalties. If a landlord applies for forbearance, they also cannot charge late fees or penalties to their tenants.

Federally-backed mortgage loans

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These are loans that are backed by the federal government and Government Sponsored Enterprises or GSEs. You may be eligible for mortgage forbearance if you have a loan that is:

  • insured by the Federal Housing Association (FHA)
  • guaranteed or insured by the Department of Agriculture
  • insured under section 255 of the National Housing Act
  • guaranteed or insured under section 184 or 184A of the Housing Community Development Act of 1992
  • guaranteed or insured by the Department of Veterans Affairs
  • purchased or securitized by Fannie Mae or Freddie Mac

Requesting forbearance

If your mortgage falls into one of the above-mentioned categories, contact your loan servicer to file a request. They only need your attestation that you have experienced financial hardship (directly or indirectly) due to the COVID-19 pandemic. You don’t need to submit any more documentation than that, and your loan servicer cannot require you to do so.

Check the website of the department or agency (VA, USDA, Fannie Mae, Freddie Mac, etc) that backs your mortgage loan to find out the deadline for applications. Payment options may also vary for each entity (lump sump, deferral program, repayment plan, etc.) when the forbearance period is over.

If, however, you can still afford your mortgage, it is recommended that you don’t request a forbearance. With a forbearance, you will still have to pay the full amount of your mortgage, only at a later date, and you may not be able to file a request again if you happen to experience a real struggle later on.

Requesting for extension

After the 180-day forbearance period is over and you still need assistance, you can request an additional 180-day extension.

Relief for non-government-backed loans

The CARES Act is for federally backed loans only. So, what should you do if you have a non-government-backed mortgage?

Contact your servicer or lender. Ask them about policies in place about loan forbearance or other forms of mortgage relief during this global crisis. They may offer deferral on your payments, forgiveness of late fees, or a loan modification.

Don’t stop making payments before you talk to your lender. If you are struggling to pay your mortgage, contact your lender or servicer as soon as possible. Lenders don’t want you to lose your house because that also means lost income for them. Let your lender know of your financial situation and talk about possible alternatives. If you suddenly stop paying, you will likely face late fees, negative effects on your credit score, and possibly even foreclosure.

Check for state protection programs. Your state may have special protection programs in place to protect homeowners from foreclosure and eviction. Check your state’s website to find out if there are such programs available to you.

Talk to a HUD counselor to find out what other options you have, free of charge.

For many Americans, the threat of losing their home may not have been as close as it is now. If you are in the same boat, there are plenty of options that you can look into, whether you have a federally backed loan or not.

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