Coronavirus Mortgage Relief: Hardship Options During the Pandemic

Millions of Americans are worried about the financial impact of the coronavirus. Unemployment is on the rise, expenses are spiraling, income is dwindling, and homeowners are finding themselves in serious hot water.

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Fortunately, mortgage lenders are offering a helping hand to make those monthly payments more manageable and alleviate some of the burden.

Read this guide if you’re wondering how the coronavirus has impacted mortgage payments and what you can do to get some relief.

The First Step

The coronavirus has caused a lot of distress for countless Americans, but not everyone has been affected. If your income is the same and you can still afford your monthly mortgage payments, you should do so. 

If you don’t need help, you probably won’t be offered it, and you can’t use the coronavirus as an excuse to skip on your monthly payment. This is not the time for cutting corners, taking risks, and desperately seeking money you don’t need and aren’t entitled to.

We understand that everyone wants to save a little money and make life easier for themselves, but lenders are getting a lot of phone calls right now and have a lot to deal with. Not only could you find yourself waiting on hold for prolonged periods and wasting most of your day, but when you eventually get through, you may not get the sympathy you want.

If you genuinely are struggling, however, you shouldn’t feel ashamed to contact your lender and should call them as soon as you can. 

This is true for anyone who is making less money than they usually do and is struggling to make ends meet. It’s also true for anyone who has recently lost their job and for self-employed homeowners who are expecting to be out of work for long periods.

What Mortgage Relief Options are Available?

The Coronavirus Aid, Relief, and Economic Security act or ‘CARES” for short, was established to help Americans struggling with their finances. If you qualify, you can get help with one of the following:

Right to Forbearance

Mortgage forbearance is when you reduce your mortgage payments or pause them for a fixed period of time (up to 180 days). It can help you through this difficult time, allowing you to get your finances in check. Forbearance options differ depending on the user and the lender, and you can contact your provider to learn more.

With mortgage forbearance, your debt is not forgiven, and the balance will remain at the end of the fixed period. You need to cover any payments you missed and repay the difference if your payments were reduced.

In other words, the debt and your obligations will remain, but forbearance can buy you some extra time. If you’re self-employed or working on a limited contract, this time could be all you need to get back on your feet and start earning again. If you’re unemployed, it can help you to keep your head above water while you get your finances in check, look at your options, and apply for more work.

Foreclosure Moratorium

A moratorium suspends foreclosure or stops it entirely. If you’re in the process of pre-foreclosure or foreclosure right now, this can help to suspend everything and buy you a little more time.

As we have noted many times on this site, lenders do not want to foreclose on your home. It’s a last resort, and one that costs them a lot of money. If giving you a little more time means there is a chance you will pay what you owe and get back on track, they will be glad to help out.

However, the government won’t bail you out completely here. A mortgage is a secured debt and the lender is within their rights to take that collateral if you persistently avoid your debt obligations.

Do You Qualify for Coronavirus Mortgage Relief?

You don’t automatically qualify for mortgage relief just because you’re a homeowner. To be eligible for protection as per the CARES act, you need to have a federally-backed mortgage, including those offered by the FHA and USDA, as well as Fannie Mae and Freddie Mac.

This accounts for the vast majority of mortgages in the United States, but there are some exceptions.

If you qualify, you need to contact your loan servicer to discuss your options. With mortgage forbearance, you can request a suspension of payments that will last up to 180 days, with an additional extension that also lasts for up to 180 days. During this time, they cannot charge you any additional money in interest or fees but will still charge you existing interest.

This suspension won’t be offered just because you ask for it. You need to explain your situation to your lender and tell them why it’s required. They will ask questions about your current financial situation, how the coronavirus has affected you, and whether you expect the problem to be short or long term.

As for the foreclosure moratorium, lenders have been warned that they cannot foreclose for at least 60 days beginning March 18, 2020.

Back on Track

When the pandemic is over and life gets back to normal, contact your lender and reinstate the previous terms. This is very important with mortgage forbearance, as you’ll still owe all of the payments that you missed during the postponement. The longer these go unpaid, the greater your balance will be and the longer it will take to pay off your mortgage.

As soon as you’re able to continue making repayments, do so. You may also want to look into establishing an emergency fund to prevent you from encountering further issues down the line. Should there be a repeat outbreak or more issues with your employment, this emergency fund can help to tide you over.

Be Wary of Scams

The coronavirus has been a disease of separation, desperation, and, at times, altruism. It has brought out the best and the worst in humanity, from those putting their lives on the line to help people in need, to those seeking to lie, cheat, and steal their way to prosperity.

Scammers are using the fear surrounding this virus to steal money and personal information and you need to be very wary when receiving an email or phone call relating to a new scheme, offer, and anything else that requires you to hand over money or sensitive information.

Generally speaking, your bank will not call you directly and ask for your credit card or bank account information, and they will definitely not request this information through email. The same goes for passwords and other sensitive data. 

If it sounds too good to be true, it probably is. Contact your lender directly if you want to confirm any details they have apparently sent you. Make sure your less tech-savvy friends have the same information as well, especially if they’re old and vulnerable, as they are the ones most likely to be in the scammer’s crosshairs.

Bottom Line: Document Everything

Once you have an offer from the lender, you should get everything in writing and keep all of those records, just in case it causes issues further down the line. You should also pay close attention to your credit report and to all records concerning the mortgage.

Make sure everything is being recorded properly and there are no mistakes and issues that are adversely impacting your credit score. It may not seem like a big deal right now, but it could prevent you from getting credit in the future. If you spot a mistake, dispute it immediately to minimize the impact it has on your financial situation.