What should you know and where can you turn for help if you’re among the record 10 million U.S. workers filing unemployment claims in the past two weeks and struggling to pay your mortgage?
The $2 trillion federal CARES Act — that’s the Coronavirus Aid, Relief and Economic Security Act — passed by Congress offers relief to about 70 percent of those with home mortgages. And there are options for other borrowers.
Q. What does the CARES Act say about home mortgage relief?
A. The CARES Act offers forbearance for homeowners with federally backed home mortgages who can’t make payments due to the pandemic.
Forbearance means a pause in payments. You’ll eventually have to pay up. The law allows homeowners up to 180 days of forbearance, which can be renewed for another 180 days. Your lender isn’t allowed to add fees, penalties or additional interest beyond scheduled amounts.
Homeowners can apply before the end of the national emergency or before Dec. 31, 2020, whichever comes first.
The CARES Act also prohibits foreclosures through May 17, 2020, for people with federally backed home mortgages.
Q. How do I know if I have a federally backed mortgage?
A. About 70 percent of home mortgages are backed by a federal agency or government-sponsored enterprise. These include: Federal National Mortgage Association (aka Fannie Mae), Federal Home Loan Mortgage Corporation (Freddie Mac), Federal Housing Administration (FHA), Department of Housing and Urban Development (HUD), Department of Veterans Affairs (VA) and the Department of Agriculture (USDA).
Fannie Mae has an online lookup tool at https://www.knowyouroptions.com/loanlookup or you can call (800) 232-6643 toll-free.
Freddie Mac has a look-up tool at https://ww3.freddiemac.com/loanlookup/ or you can call (800) 373-3343 toll-free.
Q. What if I have another type of mortgage?
A. The other 30 percent of mortgages are on the books of the banks that lent the money or are held in private securities. Those aren’t covered by the CARES Act. But many lenders are offering similar forbearance programs. Contact your servicer directly if you’re having a hard time making payments.
Most lenders don’t want to foreclose, says Barry Zigas, a senior fellow in housing policy with the Consumer Federation of America. It’s a hassle, and they figure most people will eventually recover financially and be able to pay.
“It’s not in anybody’s interest to push people over a cliff into foreclosure,” says Debby Goldberg, vice president of housing policy for the National Fair Housing Alliance.
Get any agreement in writing. You’ll need documentary proof that your lender offered to work with you.
Q. Is this mortgage relief automatic?
A. No. You have to apply for forbearance with your loan servicer.
Q. How quickly will I get help?
A. The federal Consumer Financial Protection Bureau predicts long hold times for telephone assistance due to a crush of calls to loan servicers. Applying online, if your loan servicer offers it, might be faster.
Q. Will I need piles of documents?
A. If you have a federally backed loan, all you need is to write a letter attesting that you’re unable to pay your mortgage due to the pandemic. You won’t need to produce additional documents. “That’s meant to get people relief more quickly,” says Sarah Bolling Mancini, an attorney with the nonprofit National Consumer Law Center.
If your mortgage isn’t covered by the CARES Act, your loan servicer might require additional proof of hardship. When you contact your servicer, have your loan number ready. And take notes documenting all actions and conversations.
Q. Should I apply for relief even if I don’t need it now?
A. No. Loan servicers will be jammed with requests. If you ask for forbearance when you don’t need it, you’ll take time that could be used to help someone else.
Q. Is this free money?
A. No. Those who get forbearance eventually will have to pay what’s owed — at the end of their loan or in a modified new mortgage. “People should be very clear that this is not forgiving the mortgage payments; it’s just delaying the mortgage payments,” Goldberg says.
Q. How long is the forbearance pause?
A. Homeowners with federally backed mortgages can request up to 180 days of forbearance initially. That’s renewable to up to an additional 180 days.
Homeowners with non-federally backed mortgages should check with their loan servicer to see what’s offered.
Q. What if I own a multi-unit building?
A. The 180 days of forbearance applies to buildings with one to four units. Owners of buildings with more than four units who have a federally backed loan can get 30 days of forbearance if they agree not to evict tenants for nonpayment of rent. That’s renewable twice up to a total of 90 days under the CARES Act.
Q. What happens after the forbearance period?
A. This is a bit tricky. The law doesn’t specify, and loan servicers are still working out the details. It’s possible some could demand that all of the money be paid at once, though that’s unlikely, experts say. Most lenders are expected either to modify the loan, increasing the monthly payments slightly to make up for the missed months, or push back the end date of the loan. Make sure you understand what’s being offered.
In the case of government-backed loans, the servicer might tack on a no-interest silent mortgage at the end of the loan. Then, when you pay off your original mortgage or sell your house, you’d have that extra lien to pay off.
Q. Will asking for help negatively affect my credit?
A. Not if you go through the process and get an accommodation from your lender. That’s true for federally backed and other mortgages. But the key word in the law is “accommodation.” If you miss payments without getting help from your lender, those missed payments will hit your credit report. And if you were already behind on your mortgage before coronavirus struck, your previous troubles will show up as well.
The key is to contact your lender, be upfront about what’s happening and get help — in writing.
Q. Is other help available?
A. In Chicago, Mayor Lori Lightfoot announced the COVID-19 Housing Assistance Grant program for Chicagoans who’ve been hit financially by the pandemic. It offers $2 million in onetime grants of $1,000 each to help Chicagoans with rent and mortgage payments. Half of the grants will be awarded by lottery; the other half will be distributed by nonprofit community organizations. Apply online at www.chicago.gov/coronavirus.
The Illinois Department of Financial and Professional Regulation is urging all mortgage loan servicers to defer payments for 90 days for those affected by the pandemic.
Q. Where can I find dependable advice?
A. HUD-approved housing counselors offer independent advice at little or no cost. To search for a counselor by ZIP code, go to https://www.consumerfinance.gov/find-a-housing-counselor/ or call (800) 569-4287 toll-free. Many also offer help for non-English speakers. The Consumer Financial Protection Bureau also has info and links for homeowners.
Q. Anything else I should be concerned about?
A. Consumer advocates are bracing for an onslaught of “mortgage rescue” scams. Scammers posing as lenders or housing attorneys target struggling homeowners, claiming they’ll renegotiate loans if the borrowers agree to send the payments to them. By the time the homeowner realizes their “helper” was a fraud, they’ve lost additional money and are facing foreclosure.
“It’s really important for people to be very wary and very cautious,” Goldberg says.
