Earlier this year Congress passed the CARES Act, which among other protections and financial relief, provided a safety net to protect borrowers from losing their homes. Yet five months after its passage, more than 1 million homeowners who may qualify for mortgage relief through forbearance, are delinquent on their mortgages and facing foreclosure when they need not be. Let’s look at the facts.
The CARES Act provides that homeowners with federally guaranteed mortgages (Fannie Mae, Freddie Mac, VA, FHA, etc), may apply for a six month forbearance, meaning they can skip monthly payments for up to six months without penalty and make them up later and/or have them tacked onto the end of their current mortgage period. If you’re still having difficulties making the payment at the end of the initial six-month period, you can request a six-month extension.
Don’t have a federally backed loan? Your lender is not required to provide a forbearance option although many do. Why? Because lenders learned some hard lessons during the last fiscal crisis in 2008-2009 and know they don’t want to be in the foreclosure business again. That end-result is a lose-lose-lose situation for everybody. It puts a family out of their home, it returns a potentially damaged property to the lender who must sell at a loss, and if enough of them hit the market at once, property values tumble which could lead to a broader market collapse. They want to work with you, they don’t want your house.
But in most cases, they will not contact you to initiate the process. If you’re making your payments, even under duress, they’re quite content to keep taking your money. And even after forbearance is granted, they will still send a monthly mortgage statement making it appear that you should still be making your payments including reminding you that your payment is delinquent.
At this point the number of borrowers who have fallen through the forbearance safety net represents only a small percentage of the 53 million mortgage holders in the country, but it’s a number that doesn’t need to be at risk. So why are they? Well, according to a recent survey by the National Housing Resource Center, some 57% of respondents weren’t aware of the program at all and nearly 70% were confused about their options, with most fearing the rumor that at the end of three months or six months, they would be required to make a large lump sum payment to get their loan current again. Not true, but that fear is keeping a lot of folks from seeking the relief they need and forcing them onto the path of foreclosure.
The process can be time consuming and confusing, but worth the effort. Imagine the burden lifted if you didn’t have that hefty mortgage payment for the next six months, with no penalties, added fees or negative declaration on your credit history. That’s just the breather many of us need to get back on our feet, hopefully get back to work, and avoid more serious problems down the road.
So, here’s some tips to make the job easier.
- Contact your mortgage servicer – the people you send your payment to every month. Be persistent as their phones are very busy and they may not be fully staffed during this lockdown. They can tell you if you have a federally backed loan and direct you to their website which, by law, must contain information on how to apply for forbearance.
- The CFPB website https://www.consumerfinance.gov/coronavirus, has a wealth of information detailing your options so you know what your loan servicer can and must do by law. There’s also a complaint line if your servicer doesn’t want to play nice. That’s what the Consumer Finance Protection Bureau was founded to do – consumer protection.
- Keep detailed records of phone calls and emails, who you spoke with, what you understood, and get everything you can in writing. A verbal agreement isn’t worth the paper it’s written on.
- Your servicer will continue to send you monthly statements – that’s their job. Your job is to diligently avoid making a payment during the term or your forbearance.
- Your servicer should assign a single point of contact for you. They should communicate with you regularly and it’s up to you at the end of the initial six months, to request an extension. You will also need to request the deferral of payments as you near the end of your forbearance, meaning they tack any deferred payments onto the end of your mortgage rather than requiring a lump sum. After all, if you can’t make a $2,000/month payment today, you’re not likely to have $12,000 saved up in six months.
There are measures in place to insure you don’t become a mortgage statistic or casualty of this current crisis. A group of government agencies and housing policy advocates are in the process of starting a national ad campaign advising property owners of their rights and options and many mortgage lenders have boosted their outreach to borrowers in hopes of avoiding foreclosure problems in the future. But you can protect yourself today by making a couple phone calls and finding out what options you have to deal with what is probably your biggest single payment every month. Good-luck, be persistent, and be safe.
Gene Wunderlich is Vice President, Government Affairs for Southwest Riverside County Association of Realtors. If you have questions on the market, please contact me at GAD@srcar.org.