During times of economic turmoil and widespread unemployment, you are not alone if you find yourself concerned about keeping up with your mortgage payments. According to a U.S. Census Bureau survey earlier this year, a quarter of all Americans either missed a rent or mortgage payment, or had little to no confidence that they would be able to make next month's payment on time.
The good news is that you do have options if you find yourself dealing with income loss or otherwise struggling financially.
What the CARES Act Means for You
At the onset of the pandemic, our government passed the Coronavirus Aid, Relief and Economic Security (CARES) Act to help combat the economic downturn that occurred as a result.
The CARES Act set into motion the following guidelines for homeowners and mortgage lenders:
- Mortgages backed by the federal government may be eligible to suspend payments if a borrower is dealing with financial hardship
- Lenders will not charge late fees or report late payments to credit bureaus during this time
- Foreclosures and foreclosure-related evictions are suspended until the end of the year
- If your mortgage is not federally-backed, contact your lender and ask about hardship plans and options
First Things First: Reach Out to Your Mortgage Lender
It is very important that you do not assume you will be covered by the CARES Act and just stop making your monthly payments—even if you are not eligible for the CARES Act, you probably have more options than you might realize. Contact your lender as soon as possible to inform them of any financial circumstances, and ask what options they have in place as a result of the current crisis. They'll likely have a few options for forbearance or modified loan agreements for you to consider, though you will generally need to submit some sort of documentation proving your financial hardship.
Forbearance vs. Refinancing
Forbearance options will defer your mortgage payments for anywhere from six-12 months, with the understanding that payment will still be due at the end of forbearance. Forbearance is absolutely not a forgiveness program, but this option does leave you with more cash flow during otherwise uncertain times. If you are unable to repay your missed payments all at once, you may be eligible to make higher payments for a period of time to repay the amount past due. If you can resume your monthly payments at any point, you may be eligible to defer the amount past due until a later date.
Some mortgage lenders are also offering loan agreement modifications during this time, many in the form of a longer-term loan period or a lower interest rate. Loan modifications create a solution that changes the terms of your loan in order to come up with a monthly payment you can afford. Your monthly payment amounts will be reduced, leaving you with more financial wiggle room.
Research Additional Options Available to You
There are many federal, state and local entities offering loans, grants and other assistance programs for homeowners struggling as a result of the pandemic. Federal and state resources are often distributed to county and city departments, and are often distributed from there to local agencies or financial institutions to manage. Contact county and city offices to ask about loan and grant availability and requirements, and reach out to local banks and credit unions.
Additional resources for homeowners during this time:
- gov Temporary Mortgage Relief
- USDA Rural Development Programs
- Housing and Urban Development Resources for Homeowners
- Consumer Financial Protection Bureau Mortgage and Housing Assistance
What to Do Once You've Received Mortgage Assistance
If you've received assistance with your mortgage payments during the pandemic, continue to closely monitor and document your account and statements to make sure they stay error-free. Cancel or adjust any automatic payments you have set up to ensure you avoid any fees or charges from your bank. As soon as your income is restored or at a level where you feel more comfortable, contact your mortgage lender and resume your regular payment schedule.
We're all doing our best to work through these unprecedented times. If you hit times of financial hardship, don't panic—research which programs are available so you can choose the option that makes the most sense for you. Do not simply stop making payments, or you may encounter consequences like charges, delinquent credit, or even potential foreclosure. Remember that during times of crisis, there is an increased risk of spam and fraud, so ask questions and read all materials provided to you carefully.
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