The federal law, the Corona-virus Aid, Relief, and Economic Security (CARES) Act, puts in place two protections for homeowners with federally backed mortgages:
• First, your lender or mortgage loan servicer may not foreclose on you for 60 days after March 18, 2020. The CARES Act prohibits lenders and servicers from beginning a judicial or non-judicial foreclosure against you, or from finalizing a foreclosure judgment or sale, during this period of time.
• Second, if you experience financial hardship due to the corona-virus pandemic, you have a right to request a forbearance for up to 180 days. You also have the right to request an extension for up to another 180 days.
You must contact your loan servicer to request this forbearance. There will be no additional fees, penalties or additional interest (beyond scheduled amounts) added to your account. You do not need to submit additional documentation to qualify other than your claim to have a pandemic-related financial hardship.
The Federal Housing Finance Agency (FHFA) regulates Fannie Mae, Freddie Mac, and the 11 Federal Home Loan Banks. These government-sponsored enterprises provide more than $6.3 trillion in funding for the U.S. mortgage markets and financial institutions. Your Mortgage loan servicer can tell you if your loan is regulated as a federal loan.
The New Option
On May 14th, the FHFA unveiled a new repayment option for homeowners struggling financially in the wake of the corona-virus pandemic. Prior to this, borrowers with financial hardship due to the pandemic have been able to receive forbearance. The missed payments will have to:
• be paid back by the borrower after the forbearance ends,
• refinance the payments to include these unpaid amounts, or
• increase the terms in the same number of missed or unpaid months.
The Mortgage Loan Servicers were required to evaluate borrowers for one of several repayment options, generally referred to as a “hierarchy” of repayment and loan modification options.
However, under this new proposal, Fannie Mae and Freddie Mac will offer borrowers currently in forbearance the ability to puts the missed mortgage payments into a payment due at the sale or refinancing of the home, or at the end of the loan. With this new option, the borrower’s monthly mortgage payment will not change. The Mortgage Loan Servicers will begin offering the new payment deferral repayment option starting July 1, 2020.
Remember, a mortgage forbearance is not automatic, so you can’t just stop making payments otherwise your credit report will suffer and you can end up in default. You must contact your lender or mortgage loan servicer. Asking for mortgage forbearance will not affect your credit report as a negative activity. Not calling your mortgage loan servicer will put your credit at risk.
What to do if my loan is not a federally backed mortgage?
If you don’t have a federally backed mortgage, most private lenders are offering forbearance and loan modification options. The repayment options might include tacking what’s owed to the back of the loan to avoid a large lump-sum amount at the end of the forbearance period. Before making a final decision, be sure you understand what your repayment options are.
Also, you may have relief options from your state. In the state of California, Governor Gavin Newsom negotiated and secured support from Citigroup, JPMorgan Chase, U.S. Bank, and Wells Fargo and nearly 200 state-chartered banks, credit unions, and mortgage loan servicers to protect homeowners and consumers.
Californians who are struggling with the COVID-19 crisis may be eligible for the following relief upon contacting their financial institution:
• 90-Day Grace Period for Mortgage Payments
• No Negative Credit Impacts Resulting from Relief
• Moratorium on Initiating Foreclosure Sales or Evictions
• Relief from Fees and Charges
Other states in the Union might get similar agreements to protect homeowners.
If you need more information, please don’t hesitate to call, or text us. In these times of financial stress, it is better to ask for help and information to help each other. Feel free to call me at (323) 942-9347 or leave me a message in the next form:
[Form id=”1″]Sources:
• Consumer Financial Protection Bureau – CARES Act Mortgage Forbearance: What You Need to Know
https://www.consumerfinance.gov/coronavirus/cares-act-mortgage-forbearance-what-you-need-know/
• Guide to coronavirus mortgage relief options https://www.consumerfinance.gov/about-us/blog/guide-coronavirus-mortgage-relief-options/
• FHFA Announces Payment Deferral as New Repayment Option for Homeowners in COVID-19 Forbearance Plans https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Announces-Payment-Deferral-as-New-Repayment-Option-for-Homeowners-in-COVID-19-Forbearance-Plans.aspx
• Everything you should know about mortgage forbearance https://www.bankrate.com/mortgages/everything-you-should-know-about-mortgage-forbearance/
• Governor Gavin Newsom Announces Major Financial Relief Package: 90-Day Mortgage Payment Relief During COVID-19 Crisis https://www.gov.ca.gov/2020/03/25/governor-gavin-newsom-announces-major-financial-relief-package-90-day-mortgage-payment-relief-during-covid-19-crisis/