The health and economic impact of the spread of COVID-19 has been devastating, and there is still no end in sight.
More than 30 million Americans have applied for unemployment since the outbreak of the pandemic, a number that is likely to continue growing. Savings and retirement nest eggs are vanishing as the stock market collapses. It’s only a matter of time before the effects ripple through other sectors of the American economy.
If your source of income is threatened by the fallout from the novel coronavirus, you are probably—and understandably—very worried about losing your home, whether you own or rent. Take heart that the federal government has placed a moratorium on evictions and foreclosures on houses backed by government-sponsored mortgage facilitators Freddie Mac and Fannie Mae, or by the Federal Housing Administration (FHA). Freddie, Fannie, and the FHA back the vast majority of single-family houses. So if you’re a homeowner in financial trouble, you won’t be subject to foreclosure or eviction, through May 17.
Federal regulators have also directed mortgage servicers to offer reduced mortgage payments, forbearance, or deferrals to homeowners impacted by the crisis if they have mortgages backed by Freddie or Fannie. Forbearance could be extended for as long as a year, and the servicer will work with you on a long-term solution for making up missed payments when the pandemic has passed.
The private sector and local governments are also taking action. In California, state-charter banks and a number of big national banks will pause mortgage payments for 90 days for those impacted by COVID-19. Bank of America, JPMorgan Chase, and Wells Fargo are also working with borrowers who’ve been affected across the country.
Federal, state, and local officials have also taken measures to protect renters. At the federal level, the CARES Act passed by congress places a moratorium on evictions for federally subsidized housing through July 25. You can find who the CARES Act applies to here. States and cities have independently placed eviction moratoriums on their jurisdictions, many of which you can find here.
But given the situation is incredibly fluid, there are steps you can take to protect yourself in the event that you lose some or all of your income, or if governments change their policy.
Find out who owns your mortgage or rental unit
Whether you qualify for relief from the federal government or a private lender depends on who owns your loan. For some, you’ll already know who owns your loan from going through the process of buying your home.
Freddie Mac and Fannie Mae have lookup tools on their websites that let you see if they own your mortgage. If you think your loan is FHA, the closing documents on your mortgage will indicate whether it is or not.
FHA, Freddie Mac, and Fannie Mae back a substantial portion of mortgages, roughly 40 million of the 53 million outstanding mortgages. But if you have a jumbo mortgage for an expensive house, or if you’re a subprime borrower, your loan could be owned by a private lender.
Freddie and Fannie also have tools to find if your multifamily rental unit is backed by the federal government. If you don’t find your building in the database but think your unit might be federally subsidized, call the helplines in this link. This database can help you determine if your rental unit is subsidized by Low Income Housing Tax Credits, a program run out of the Department of Housing and Urban Development, which is also protected under the CARES Act.
If your home is not federally subsidized, state or local laws may help you as well. Here’s a list of actions states and cities have taken to curb eviction.
Contact your mortgage servicer immediately
Mortgage servicers are the companies that manage your loan. They send you statements, collect your payment, field inquiries from borrowers, and initiate foreclosure. Contact your mortgage servicer if you’re at risk of missing a payment.
Note that sometimes your mortgage lender is also your mortgage servicer, but it’s common practice for your mortgage lender to sell loans to another company that specializes in servicing mortgages. You can find the name of your servicer on your mortgage statement.
When you call them, tell them your situation, who owns your loan (they’ll know, too), and ask what options are available. But be aware that they almost certainly won’t make any special exceptions for your case for a number of different reasons.
One is that there are about to be countless homeowners in your exact situation, so any exception made for you is likely to extend to others as well. Second, servicers follow strict guidelines set by Freddie and Fannie when servicing your mortgage. The good news is those two enterprises just announced they will not evict or foreclose through May 17, and that mortgage payment forbearance for up to a year is possible.
Diligently document your financial hardship
As things progress, the federal government might change its policy or offer some additional form of relief for those who qualify. Freddie and Fannie, and thus your servicer too, could make changes as well. It’s a very fluid situation.
If this happens, you’re going to want to have all the documentation showing that you are in need. If you’re taking a pay cut, start collecting pay stubs or communication from your employer that shows this. If your stock portfolio tanked, get statements that show it. If you’re laid off, save those related documents.
“It’s really important to provide evidence of whatever hardship is leading to or causing you to fall behind [on mortgage payments],” says Patrick Boyaggi, CEO of mortgage marketplace Own Up. “Presumably if you could qualify for financing and you get a mortgage, you’re in a position to do that. Something has transpired in your life that puts you in a position where you can’t do that.”
Document everything that transpires between you and the servicer, or you and your landlord
Mortgage servicers are about to be swamped with calls from people dealing with the coronavirus fallout. Furthermore, mortgage forbearance could cause chaos in the mortgage servicing industry that could cause some of them to go out of business or be highly disrupted.
While servicers are likely recording your call with them, it’s important to document all your communication with them for your own records, too. If you can record your calls with them using a voice recorder or smartphone, do it. If they send you emails related to your mortgage, put them in a specific folder in your email account. If they send you paperwork in the mail, put it in a file folder and have it handy.
This way, if the servicer loses documentation of what it promised you in the deluge that is about to unfold, you’ll be able to play the call back to them or send them documentation of any kind.
This applies if you’re a renter as well, except instead of your mortgage servicer, document all your communication with your landlord.