What Homeowner's Should Know About The Fed's Mortgage Relief Plan

Amidst the COVID-19 pandemic crisis, last week President Trump called for lenders to suspend all foreclosures and evictions for the next 60 days for homeowners affected by the crisis and unable to make their mortgage payments. In response, HUD, Fannie Mae, and Freddie Mac all announced they are suspending foreclosures and evictions for minimally 60 days to allow people to keep their homes, as the Coronavirus spreads and more homeowners lose jobs. The Federal Housing & Finance Authority has also asked that loan servicers grant up to 12 months of mortgage forbearance for Americans who can’t pay their bills. FHFA Director, Mark Calabria, then called for the entire mortgage industry to adopt similar policies as well.

According to Fannie Mae the following applies to the Disaster Relief Efforts:

• Homeowners may request mortgage assistance by contacting their mortgage servicer— or, homeowners with a Fannie Mae-owned mortgage loan may work with our Disaster Response Network as outlined below.
• Foreclosure sales and evictions of borrowers are suspended for 60 days
• A HUD-approved housing counselor will assess your needs and create a personalized action plan. They’ll help you work with your mortgage servicer on payment relief, offer financial coaching and budgeting, and support your ongoing success with web resources and periodic check-ins

Although the plan is designed to relieve the burden of affected homeowners, this plan may be a bit mis-leading. For homeowner's who may be hoping for assistance from this program, here are some facts you may not be aware of, but definitely should be.

Relief is NOT Automatic - The Fed did not just declare a "Mortgage Holiday" and anyone who has the ability to, needs to be making their regularly scheduled payment. Under the proposal, only those homeowners who have suffered a loss of job or income will qualify for reduced or suspended payments and this doesn't just happen automatically. Each homeowner will need to contact their lender or loan servicer to work out a payment plan specific to them and their financial situation. The lender's plan should be designed to get them back on their feet making regular payments as soon as possible.

Relief Currently ONLY Applies to CERTAIN LOANS - The President's mandate for relief currently only applies to loans guaranteed by FHA, VA, USDA Rural Housing, Fannie Mae and Freddie Mac. This only covers about half of all home loans in the U.S. and while regulators say they do expect that the entire mortgage industry will adopt a similar policies quickly, in the meantime, homeowners will just have to hope that their specific lender will adapt. Homeowners will need to call their loan company and work out a repayment plan with their loan company for once they recover financially.

A Forbearance is NOT Free Money - According to Fannie Mae, "homeowners impacted by this national emergency are eligible for a forbearance plan to reduce or suspend their mortgage payments for up to 12 months". But a loan forbearance is not a forgiveness of debt. Forbearance of a loan means that the lender has agreed to a temporary modification of a borrowers normal payment obligation schedule. 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."

Possible NEGATIVE Impacts On Your Credit - According to Fannie Mae "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". Both Fannie and Freddie are directing lenders not to report late or missed payments if they are in a forbearance plan. But for this to work, all lenders will have to comply and do what the government is asking them to do. Furthermore, the one HUGE question not yet answered is what the legality of the government declaring, "borrowers can skip mortgage payments for several months" or interfering with a legal and contractual obligation to make payments really is. Odds are with the amount of people needing help, negative reporting is going to happen to at least to a portion of homeowners with non-agency backed loans.

Delaying a FORECLOSURE is just that - The Fed plan is to ease tensions and to keep everyone safe by suspending all foreclosure sales and evictions of borrowers for 60 days. After that it is still uncertain. What is certain is that if you are already in foreclosure proceedings, once the moratorium is lifted you will go right back to being in foreclosure. Once at this point there's not much you can do except raise the cash to purchase the home outright.

Things To Keep in Mind & Resources from The National Association of Realtors to help guide you:

• Get in touch with your lender immediately: If you expect to be late or unable to make your monthly mortgage payment give them a call. If you wait it may be out of their hand s to do anything for you by then
• With a Forbearance: The deferred amount will have to be paid back and in many instances must be paid all at one time. Work with your lender to come up with a plan that makes sense for you.
• Protect Your Credit: Don't just stop making payments and hope for the best! Lenders are not yet required, not to report negative payment history to the credit bureaus. Late house payments and foreclosures can affect your ability to purchase a home in the future. The CFPB is urging consumers to protect their credit during this pandemic.
• Reach Out to Your State Resources: People facing unemployment are likely eligible for other benefits: Unemployment benefits can take several weeks to get set up do if you’re in need of assistance then contact the Alabama Dept. of Labor https://labor.alabama.gov/uc/ICCS/default.aspx a call .
• Protect Yourself Financially: The CFPB has a number of resources focused on financial protection, both short and long term, such as paying bills, income loss, and scam targeting. Resources include contacts for housing and credit counselors, debt collectors, and state unemployment services.
• Know Your Rights as A Homeowner: U.S. housing policy varies across states and localities. JustShelter.org has a comprehensive database of community resources to help individuals who may be facing eviction.
• Student Resources: The Department of Education announced that it will allow forbearance on federally-backed student loans for sixty days beginning on March 13, 2020. Likewise, the Administration has also waived all interest on student loans for this period. Contact your student loan servicer to being a forbearance. Servicers are sharing information.
• Veterans Should Know: The Department of Veterans Affairs (VA) is  providing information to keep Veterans and stakeholders safe while continuing the mission of the VA Home Loan Program.
• For Businesses Owners and the Self Employed: The Department of Labor has provided  resources for employers and workers in responding to COVID-19 and including the impact on wages and hours worked and protected leave.
• TAX FILING and PAYMENT DEADLINE EXTENDED: In light of COVID-19 crisis, the IRS on March 18 extended the income tax payment deadline for individual returns (as well as all other entities) until July 15, 2020. Two days later, the IRS also extended the tax filing deadline to July 15, 2020. Additional forms do not need to be filed to qualify for these extensions. The IRS has also created a Coronavirus Tax Relief section on their website with updated information for taxpayers and businesses.