Mortgage payments loom as many homeowners face a loss of income during the coronavirus pandemic. Here’s what those in financial distress need to know.
Q: What should I do if I can’t pay my mortgage?
A: The federal Cares Act provides two benefits if you have a financial hardship caused directly or indirectly by the coronavirus and your loan is owned or guaranteed by a federal agency including Fannie Mae, Freddie Mac, the Federal Housing Administration, Department of Veterans Affairs and Department of Agriculture.
On May 12 four federal agencies launched a consolidated website for people having trouble paying their mortgage or rent as a result of the coronavirus. The site has information about mortgage relief under the Cares act, protections for renters and information on avoiding COVID-19 related scams. It also has lookup tools for homeowners to see if their mortgage is federally backed, and for renters to see if their unit is financed by FHA, Fannie Mae or Freddie Mac. Federal backing may give them special protection.
Q: What does the Cares Act provide?
A: First, your servicer cannot start a foreclosure or finalize a foreclosure judgment or sale for 60 days starting March 19. Second, if you have a financial hardship because of the coronavirus, you can get a forbearance for up to 180 days, plus one extension for another 180 days. You must ask your servicer for this forbearance. You may have to write a letter explaining your coronavirus hardship, but won’t need third-party documentation.
During forbearance, your payments are temporarily suspended, but not forgiven. You will have to pay them later. “There will be no additional fees, penalties or additional interest (beyond scheduled amounts) added to your account” during the forbearance, according to the Consumer Financial Protection Bureau. In addition, the servicer should not report late payments to credit bureaus during this period.
These provisions apply to government-backed loans on one- to four-family homes, including condo units, even if they are rented out.
Q: How can I find out if my loan is government-backed?
A: If you can’t reach your servicer, you can find out if your loan is backed by Fannie Mae at www.knowyouroptions.com/loanlookup or Freddie Mac at ww3.freddiemac.com/loanlookup. For FHA and VA loans, check your monthly loan statement or find the HUD-1 Settlement Statement you got when you bought the home. This federal website also allows home owners to find out if their mortgates are federally backed.
Q: What happens at the end of the forbearance period?
A: Ask your servicer this question in advance and get the answer in writing.
Normally at the end of a forbearance, the servicer can demand all missed payments in a lump sum, said Sarah Bolling Mancini, an attorney with the National Consumer Law Center. But they may offer additional options, depending on who owns the loan and the borrower’s circumstances.
“If you have a Fannie Mae, Freddie Mac, FHA, VA, or USDA loan, you won’t have to pay back the amount that was suspended all at once — unless you are able to do so,” the Consumer Financial Protection Bureau said. “At the end of the forbearance, your options can include paying all of your missed payments at one time, spread out over a period of months, or added as additional payments or a lump sum at the end of your mortgage.”
FHA loans have a new “COVID-19 standalone partial claim” that puts the missed payments into an interest-free subordinate lien that requires no payments during the term of the loan. Instead, the second lien comes due when the first mortgage is paid off or the borrower sells the property. To qualify for this second lien option, the borrower must live in the home, have been current or less than 30 days past due as of March 1 and be able to resume making on-time payments at the end of the Cares Act forbearance.
Q: What if my loan is not government backed?
A: Still call your servicer. It’s not required to offer the same benefits, but might allow reduced or deferred payments. “There is still a lot of uncertainty from the Federal Housing Finance Agency about certain aspects of this forbearance period, but servicers are determined to make sure that borrowers have the same treatment regardless of where the loan ended up,” said Michael Bright, chief executive of the Structured Finance Association, which represents the securitized loan industry.
Q: What if my property is rented out?
A: Loans backed by the federal government on one- to four-family homes are eligible for the Cares Act forbearance. Owners of multifamily apartments, those with five or more units, also can seek forbearance, but the process is more complicated.
The Cares Act also halts evictions of renters living in single-family and multifamily properties with federally backed mortgages from March 27 through July 25, regardless of whether the landlord gets a forbearance. It also halts evictions of renters from federally backed multifamily properties whose landlords receive forbearance, effective for the duration of the forbearance, which is capped at 90 days, according to the Urban Institute.
For more on evictions, see our detailed FAQ for renters at SFChronicle.com.
Q: Where can I find more information?
A: Check the Consumer Financial Protection Bureau’s website at www.consumerfinance.gov.