Mortgages: Loan Relief & Forbearance
These are difficult financial times. During the coronavirus (COVID-19) pandemic, people are losing their jobs, being furloughed, or having their work hours reduced. These are unprecedented times when unemployment rates are staggeringly high. You are not alone if you are struggling to pay your mortgage during the coronavirus (COVID-19) pandemic. Here are some resources you can use if you need help.
Often, the first thing to do is to ask for help directly from the bank that gave you the loan. You write a formal letter, called a loan restructuring request letter, and request a modification to the terms of your mortgage. This letter is the place where you can express your financial troubles in more personal terms, and it gives you the chance to request and receive better terms (like a lower interest rate, lower payments, or a longer repayment period) or to request a deferment, which is an agreement that you do not have to pay the mortgage for a set period of time (usually, a number of months).
It is important to reach out to the lender directly when you are facing hardship because your credit can be negatively impacted by missed payments and your lender might start collections activities or, eventually, file to foreclose on your property if you fall too far behind. It is also helpful to reach out proactively, rather than to sit back and wait for the lender to contact you about missed payments.
The main reasons people need a mortgage modification are job loss or reduced income due to the coronavirus (COVID-19) pandemic. If the reason you need assistance is because of financial difficulties related to the coronavirus (COVID-19) pandemic, it is important to say that, because there are mortgage relief programs directed at helping during those impacted by this crisis. However, other reasons you may need a mortgage modification or deferment include a change in your family finances (death, divorce, child care or care for the elderly), military duty and relocation, or health problems. You do not need to get overly personal, just simply explain how your circumstances have changed in general terms, and ask the lender directly for the relief you want. If you want to take a temporary break from payments, ask for that. If you want a lower monthly payment, ask for that.
Most lenders are not interested in owning and maintaining property by foreclosing on a loan, so they are interested in avoiding a foreclosure lawsuit if possible. Moreover, most of them want to help their customers harmed by the coronavirus (COVID-19) pandemic. Still, they need to know they will be paid in the future if they work with you now. That is why when writing your letter, you should explain that due to your changed financial situation, you need help but are not trying to avoid paying the debt.
The main thing for you to know is that you have rights to your home. Your lender cannot foreclose right now if you have a federally-backed mortgage.
A new federal law, the Coronavirus Aid, Relief and Economic Security (CARES) Act, gives you two new financial protections if you have a federally backed mortgage 1) a moratorium on foreclosures and 2) mortgage forbearance. More than half of all mortgages are owned or backed by Fannie Mae or Freddie Mac, which are federal agencies.
The foreclosure moratorium contained in the new federal law says that your lender or loan servicer cannot foreclose on your mortgage between March 18 and May 17, 2020, the period during which the government has already determined the coronavirus (COVID-19) pandemic will be active. This means that the lender cannot begin the foreclosure process during this time or finalize a foreclosure process, even if it was initiated prior to these dates.
Mortgage forbearance basically means that you either pay a lower monthly amount or suspend payments temporarily. Under the new law, you have the right to request forbearance for up to 180 days. After the original 180-day forbearance expires, you can request another 180-day extension. The law says that your lender can't charge you any fees, penalties, or additional interest if it does grant you a forbearance.
If you're not sure whether your mortgage is federally backed, you can check your mortgage paperwork or call your lender. You can also see whether your loan is backed by Fannie Mae here or check if your loan is backed by Freddie Mac here.
Sometimes you need more help than simply writing a letter to your lender requesting a mortgage modification will give you. Sometimes you need help understanding what the deferment or forbearance options are, and what they will do to your credit or financial situation long-term. Sometimes your lender is threatening or has already initiated foreclosure proceedings, and you need help.
If you find yourself in that situation, Court Buddy can help. We have experienced lawyers nationwide who can help you with your personal financial situation; they can talk with you to better understand your situation, help you understand your rights, provide you with advice and counsel, make a plan and negotiate for you and your family. There are many ways for you to stay in your home.