As we keep moving along down this never-ending pandemic road, hardly a day goes by when there isn’t another major hit to our nervous system. Buried in all of this bad news and extraordinary events there have been a few government programs that are helpful to citizens and homeowners. Mortgage forbearance is one of those things, assuming you can work your way through the system.
The COVID-19 pandemic has made it harder for millions of homeowners to pay their mortgages. To reduce the risk of widespread foreclosures, Congress passed the Coronavirus Aid Relief and Economic Security Act (CARES) in March. The CARES Act gives some borrowers temporary protection from foreclosure both by establishing a foreclosure moratorium and offering homeowners forbearance of mortgage payments.
Forbearance allows homeowners to suspend their monthly payments for 180 days with another 180-day extension for qualified homeowners who are impacted directly by the virus. The Cares Act is now extending the foreclosure moratorium at least until the end of 2020. New mortgage servicing guidelines also contain other changes to existing foreclosure and forbearance practices.
Unfortunately, about a third of all borrowers are not covered by the act. Those covered must have home mortgages backed by Fannie Mae or Freddie Mac, the U.S. Department of Veterans Affairs (VA) or the Federal Housing Administration (FHA). Therefore, about 1 million homeowners have fallen through the safety net that the CARES Act provides.
According to the mortgage-data firm Black Knight Inc., about 1.06 million borrowers are past due by at least 30 days on their mortgages and are not in a forbearance program. Out of this number, about 680,000 borrowers have federally-guaranteed mortgages and would qualify under the CARES Act. The balance has loans that aren’t backed by a government program and do not qualify for forbearance, though many of the lenders are attempting to work with these homeowners.
Navigating the waters of mortgage lending is never easy and some qualified homeowners either aren’t aware of the forbearance program or just can’t face the complex nature of what needs to be done. And they’re sometimes right, contacting mortgage servicers, which is the first step alone, is a challenge. Frequently you can’t get through, calls are dropped and/or sent to voice mail and no response is forthcoming. And frequently, just like applying for an original loan, the lenders will keep asking for additional documents and the merry-go-round keeps going.
There are government agencies that have set up websites to help educate borrowers about their rights and procedures as well as consumer advocates and housing-policy experts looking into a national campaign to make borrowers aware of available benefits. However, more needs to be done to help homeowners before they fall into foreclosure or have accumulated so many back payments and fees that they will never catch up until the property is eventually sold, cutting into the equity that most Americans consider their biggest asset.
Even after a safe and effective vaccine is created and distributed, we’ll have years of financial hardship ahead of us, and for some homeowners and business owners, it could be devastating. Congress needs to take an additional look at the millions of homeowners both with government-backed loans and others who will need help. If nothing is done to help and advise these people, we could have a serious flood of foreclosures down the road, hurting both the real estate market and the financial markets.
Stay positive and stay safe.
