Coronavirus: What mortgage help is available?
Our family income has dropped significantly due to being locked in due to the Corona Virus. My husbands hours have been cut and my business has been forced to shut down. We are worried about whether we can afford the mortgage for our house. Do you have any ideas?
Joshua Escalante Troesh, CFP | MBA
There are a numerous resources to help you out, including ways to get some income coming in and ways to help make your mortgage easier to manage. First, make sure both you and your husband apply for unemployment, as the federal government and many states have relaxed the requirements. There are also SBA programs available for your business.
Regarding your mortgage, start by identifying who owns your mortgage to determine the programs available to you. Even if you write your checks to a bank or credit union, the mortgage is likely owned by one of the following. Call the mortgage company to find out who owns your mortgage.
Freddie Mac Owned Mortgages
Freddie Mac is offering help for people who are either directly or indirectly impacted by COVID-19. This means you don’t need to have the virus to get relief. Details are available on My Home by Freddie Mac®, but the options available include:
Providing mortgage forbearance for up to 12 months,
Waiving assessments of penalties and late fees,
Halting all foreclosure sales and evictions of borrowers living in Freddie Mac-owned homes until at least May 17, 2020,
Suspending reporting to credit bureaus of delinquency related to forbearance,
Offering loan modification options that lower payments or keep payments the same after the forbearance period.
Fannie Mae Owned Mortgages
Fannie May offers similar relief and directs borrowers to discuss needs and seek relief through the loan servicer (the company you write the mortgage checks to). Fannie Mae also provides assistance with negotiating with servicers, developing a personal recovery plan, looking up if they own your mortgage, and accessing other resources through its Know Your Options website. Relief includes:
Foreclosure sales and evictions of borrowers are suspended for 60 days
A forbearance plan to reduce or suspend their mortgage payments for up to 12 months
Credit bureau reporting of missed payments due to a forbearance plan is suspended
Homeowners in a forbearance plan will not incur late fees
Permanent plans to help maintain or reduce monthly payment amounts as necessary, including a loan modification
Privately Owned or Bank-Owned Mortgages
If your mortgage is not with one of the above, it is likely still owned by a bank or credit union. While you are not eligible for the above relief, most banks and credit unions will still be open to helping you. Financial institutions have a financial incentive NOT to foreclose on your property and are also being encouraged to help borrowers by governments, regulators, and public opinion. When you call your financial institution, be prepared with the following information and explain things in this order.
Have information related to your relationship with the financial institution handy and remind them of the relationship you’ve had with them. This should include mentioning you’ve never missed a mortgage payment (if true) when giving your account number.
Explain the situation you are in and how you are being affected. Be specific about your drop in family income and the cause as well as the actions you’ve taken to minimize the drop - such as applying for unemployment. If you haven’t taken any actions to minimize the reduction in income, do this before calling the bank.
Have a budget ready to present to them showing your new income and the cuts you are making to make your budget work. Part of this new budget will be an amount you can afford for the mortgage payment. This will show you are being responsible with making adjustments to your overall life, will help them see how making a mortgage adjustment will allow you to continue paying the mortgage, and will give them a number to shoot for when looking at options for loan modifications.
Pro Bono Financial Advising
I am one of many financial advisors in XYPN and NAPFA who are offering pro-bono financial planning for those who are impacted by the pandemic. If you and your family have been impacted by the pandemic and would like advice on your situation, you can schedule a 1-hour financial planning session with no charge or obligation.
XYPN and NAPFA Advisors
Do NOT sell life insurance or other financial products
Do NOT accept compensation from third-parties for the advice given
And ARE legally required to provide advice as fiduciaries.