How to pause your mortgage payments during the Coronavirus crisis

If you’re struggling to make mortgage payments because of the Coronavirus related economic crisis, help is available.

As Coronavirus (COVID-19) has temporarily shuttered or negatively impacted businesses across America, unemployment and lost wages have surged. When exactly the economy recovers is anyone’s guess, but hard times are already here for many Americans.

If you’re in danger of missing a mortgage payment there are new federal programs that have been created to help – and you don’t have to be sick with the Coronavirus to take advantage of them.

Understanding who holds your mortgage and the Federal Government’s role in mortgage payment assistance

When you receive financing to buy or refinance a home, perhaps through a local bank, credit union, or mortgage company, that mortgage is often sold, and in many cases it is sold to the government-backed agencies of Fannie Mae or Freddie Mac.

Fannie Mae and Freddie Mac are regulated by an independent Federal Agency called the Federal Housing Finance Agency (FHFA). The FHFA is dictating the terms of Coronavirus related mortgage assistance for Fannie Mae and Freddie Mac, and is providing guidance for other non-government owned lenders, such as Bank of America and Wells Fargo, to follow.

To find out who owns your loan, head over to the Consumer Finance Protection Bureau’s website for instructions and loan lookup tools.

Keep in mind that while one institution may own your loan, a different institution may service your loan (i.e. sends your mortgage statements and collects your payment each month). You can find your loan servicer by looking at your monthly statement. Your loan servicer will be the point of contact that you work with to receive Coronavirus related relief.

Learning what assistance is available and if you qualify

For mortgages that are owned by government-backed agencies Freddie Mac and Fannie Mae, foreclosure sales and evictions have been suspended and forbearance (payment postponement) and modification programs have been expanded, effective as of Wednesday, March 18th and extending to May 17, 2020. Loans not owned by Freddie Mac and Fannie Mae, such as those held by national banks, have also announced that they will be offering similar assistance on a case-by-case basis.

If you suffer a decline in income, or lose your job altogether, whether or not you become sick from Coronavirus, you will be eligible for payment relief for up to 12 months without late charges, penalties, or derogatory marks on your credit. Right now, guidance from the FHFA is as simple as that. That being said, it’s a good idea to gather any documents or correspondence from your employer regarding your lost job or wages in the event that documentation is needed for your claim.

Here are the details on mortgage-related assistance from Fannie Mae. The same terms apply for Freddie Mac held mortgages. Other lenders may follow this guidance on a case-by-case basis, and further definition of assistance may develop over the coming days and weeks.

• Homeowners impacted by this national emergency are eligible for a forbearance plan to reduce or suspend their mortgage payments for up to 12 months
• Homeowners in a forbearance plan will not incur late fees
• Credit bureau reporting of past-due payments of borrowers in a forbearance plan as a result of hardships attributable to this national emergency is suspended
• After forbearance, a servicer must work with the borrower on a permanent workout option to help maintain or reduce monthly payment amounts as necessary, including a loan modification

Remember that loan forbearance is not loan forgiveness. Essentially forbearance equates to hitting “pause” on your payments – you will still owe the same amount, but you may be able to delay some or all of your payments until a later time, without incurring any additional fees or increasing your loan balance.

Making a plan to get the assistance you need

Asking for help is always tough, but take comfort that these are unprecedented times and you are not alone. Millions of Americans are going through similar hardships, and it’s in the best interest of the entire nation for as many people as possible to stay on firm financial footing. Banks want their loans repaid, and they now have guidance on how to assist when possible. Here’s how to get help, or prepare to get help.

It’s important to remember that the banks and loan service companies that you will be dealing with are staffed by regular people who are facing similar hardships. Many are working from home and some are out sick. All of them are dealing with a massive influx of requests for assistance. If you don’t need immediate assistance, don’t call. If you do need immediate assistance, be patient with wait times and prepare for your call to be as productive as possible by clearly writing out your case so you have a script to work from. In addition, keep records of all of your communications in the event that the person you are dealing with changes.

1. State your situation. Be specific and honest in your description of how your income has been impacted, and by how much – for example, “I was placed on unpaid leave from my job as a server at [specific] restaurant that was shut down because of the Coronavirus in [specific] town and state. I lost [a specific] portion of my income. Remember that if you have a co-borrower who had income that helped qualify your loan, their economic situation will need to be accounted for as well.
2. Clarify your request. Ask for the length and amount of forbearance you need. It’s good practice to also confirm that there will be no penalties, fees, or added interest, per the terms set out by the Federal Housing Finance Agency.
3. Make a repayment estimate. Honestly share your best estimate for when you think you’ll be able to resume payment, and why. Is your company closed temporarily? Do they have specific plans or timelines to begin re-opening? Are you looking for work and plan or hope to find new income that can help you make some or all of your regular payment? For some people, this may be very challenging given all of the uncertainty, but it’s best to have a plan that you can share with the loan servicer.

We’re here to help

Own Up exists to empower homeowners with personalized data and unbiased advice so they can make better financial decisions. We are living in unprecedented and uncertain times. The good news is, we’re all in this together. If we can help answer any questions, or provide guidance on a refinance or another financial issue, email us at hello@ownup.com.