Coronavirus mortgage relief: Payment assistance and forbearance options
Millions of homeowners are struggling to make their monthly mortgage payments. If you're one of them, here are things you need to know.
- Coauthor of Uninvested (Random House, 2015)
In addition to providing a lump stimulus payment and enhanced unemployment benefits to those impacted by the coronavirus outbreak, the US government's COVID-19 relief package, passed in March, provided protections for homeowners struggling to cover their mortgages. With many of those provisions now having expired, including an eviction moratorium that lapsed on July 25, many homeowners are wondering what comes next.
As Democrats and Republicans remain locked in a stalemate over the details of a second relief package, President Donald Trump has signed an executive order and three memoranda that include an order regarding eviction protections. That noted, the order does not appear to actually protect people against evictions.
The political wrangling comes amid a slew of significant economic headwinds: The unemployment rate was 10.2% in July, close to 4 million homeowners are skipping mortgage payments and, without additional government interaction, between 30 million and 40 million people may be at risk for eviction, according to the New York Times.
If you're concerned about paying your mortgage this month -- you're not alone. We've outlined the current situation, future prospects for additional payment assistance, forbearance options and other resources that could provide a lifeline below.
Read more: Coronavirus unemployment: Everything you need to know about payments, applying and more
Trump's executive actions: Do they protect homeowners?
The language of President Trump's executive order doesn't stop evictions. The current directive takes no official action itself -- rather, it leaves the decision to ban evictions in the hands of Health and Human Services Secretary Alex Azar and Centers for Disease Control and Prevention Director Robert Redfield. It also leaves open the question of whether the federal government would provide financial assistance to renters, leaving that decision to Treasury Secretary Steven Mnuchin and Housing and Urban Development Secretary Ben Carson.
Read more: 4 new executive actions for COVID relief, explained: What they do and won't do
Homeowner protections compared: HEALS vs. Heroes vs. CARES
At the moment, Republicans and Democrats in Congress are negotiating a second stimulus package. Here's how the two parties' proposals stack up in terms of mortgage and eviction relief.
- Heroes Act: Proposed by the Democrats, this legislation would expand protections to cover nearly all rental properties in the US, extend the eviction moratorium for an additional 12 months and allocate $200 billion for housing programs and another $100 billion for rental assistance.
- HEALS Act: Proposed by Republicans, this package does not specifically address eviction protection or moratoriums.
- CARES Act: Banned late fees until July 25 and evictions until Aug. 24 on properties backed by federal mortgage programs (such as Fannie Mae) or that receive federal funds (such as HUD).
Read more: HEALS vs. CARES vs. Heroes: The proposals' leading sticking points and how they all compare
Looking back: What the CARES Act covered
Skipping a mortgage payment normally has grave consequences, including blemishing your credit history, branding you a "delinquent" and putting you at risk of foreclosure. On March 18, the US Department of Housing and Urban Development issued a foreclosure moratorium, preventing loan servicers from starting foreclosure proceedings for 60 days.
When the Coronavirus Aid, Relief and Economic Security (CARES) Act was passed on March 27, it included offered expanded -- though still temporary -- relief to renters and homeowners. It required lenders to provide 180 days of payment relief to any homeowner with a federally backed mortgage, including those backed by Fannie Mae and Freddie Mac. (Nearly half of US mortgages are federally backed.) Homeowners could also apply for an additional period of forbearance -- meaning a pause or reduction in mortgage payments with no fees, penalties or additional interest -- for up to 12 months. Borrowers' credit was protected, as lenders were required to report their obligations as "current."
On July 31, many of those protections expired.
What to do if you need help now
If your mortgage wasn't covered by the CARES Act or you don't have a federally backed mortgage, you can still try contacting your lender. If you lost your job or can't work because of the coronavirus pandemic, explain the situation. Provide an update on your income -- and your expectations for the next few months -- including the stimulus payment and unemployment benefits. Include details about your expenses, savings and other assets.
Ask your lender what your options are if you can't afford to make payments. Though they're no longer required to offer all of the protections afforded under the CARES Act, some may still provide a number of options:
- Forbearance: A pause or reduction in mortgage payments. The CARES Act contained a provision that protected homeowners from fees, penalties or additional interest during forbearance -- though some lenders may require a lump-sum payment of an outstanding balance once the period ends. That would mean you'll be on the hook for every outstanding month you haven't paid, plus the regular payments when those start again.
- Loan modification: An adjustment of the terms of your loan to lower the interest rate, expand the repayment period or change the loan type. This is different from refinancing, which creates a new loan with a new interest rate, terms and closing costs.
- Revised payment plan: Instead of making a lump-sum payment after a forbearance period, you could pay it back through a modified payment plan. This could protect your credit score and help you avoid penalties and fees.
Remember: Most lenders don't want to go through a foreclosure process any more than you do. Many will be willing to work with you to avoid getting to that point.
More mortgage relief resources
If you can't afford to make payments and your loan servicer isn't offering sufficient assistance, here are few organizations that may be able to help.
- A housing counseling agency: These organizations can review your situation and help negotiate new terms with your lender on your behalf -- often for free or for a low fee. Find a housing counseling agency near you or reach out to HOPENOW, a housing nonprofit that helps homeowners get loan modifications.
- Consumer Financial Protection Bureau: You can find more information about forbearance and other relief options on the CFPB's website.
- 211.org: This website and its phone line are designed to help you find local crisis-support resources.
Read more: You lost your job because of coronavirus. These resources can help
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Clifford Colby, Shelby Brown and Erin Carson contributed to this article.