If you’re among the millions of people who’ve been financially impacted by the coronavirus (COVID-19) outbreak, you might be concerned about how to pay your upcoming bills, like your mortgage. Federal and state governments, as well as various financial institutions and loan servicers, have announced initiatives to help struggling homeowners during this national emergency. Your options generally depend on what kind of loan you have, like a Fannie Mae, Freddie Mac, FHA, VA, or USDA loan, and where you live. Get the latest on how to defer your mortgage loan payments, foreclosure moratoriums, other loan relief options, and more.
As soon as you know you’re going to have trouble making your upcoming mortgage payments, the first thing you should do is get educated on what relief options are potentially available for your kind of loan. If you have a federally backed mortgage loan, and you’re experiencing a financial hardship that's due directly or indirectly to COVID-19, you can get a CARES Act forbearance. With this kind of forbearance, your mortgage payments will be suspended or reduced for up to a year. Homeowners with federally backed mortgage loans, which include FHA, VA, USDA, Fannie Mae, and Freddie Mac loans, also get access to particular mortgage-payment relief options. Even if your loan isn't federally backed, most servicers are offering forbearances and other kinds of help to homeowners affected by COVID-19. Also, your state might provide specific protections for mortgage borrowers. Arizona, California, Connecticut, Massachusetts, New York, and Rhode Island, for example, give many borrowers facing a financial hardship due to coronavirus the opportunity to get a forbearance. (Check your state government’s website to find out about available mortgage assistance.)
Once you know what’s generally available for your situation, contact your loan servicer. If you want a forbearance, ask for it. Or inquire about how to qualify for other alternatives. Be aware that your servicer might not tell you about every available option or could give you incorrect information. That’s why you should learn what options are potentially available before you call—so you’ll know if you’re getting bad information. Depending on which entity owns or insures your loan, you can contact that entity too to learn about potential assistance.
If you don’t work out a loss mitigation option, you’ll face a foreclosure, though probably not right away. In response to the coronavirus outbreak, the federal government and some states, localities, and mortgage companies have imposed a foreclosure moratorium (a temporary prohibition on starting or continuing a foreclosure) for specific kinds of loans and in certain areas. For federally backed mortgage loans, a moratorium is in place until at least May 17, 2020. Some states, like Massachusetts, have imposed longer moratoriums. Also, in most cases, federal law prevents a foreclosure from starting until you’re more than 120 days delinquent on payments. (Whether this 120-day waiting period can run concurrently with a foreclosure moratorium is unclear at this point, so you should assume that it can.)
Under the federal Coronavirus Aid, Relief, and Economic Security (CARES) Act, homeowners with federally backed mortgage loans who've been affected by COVID-19, regardless of delinquency status, can get a forbearance. With this kind of forbearance, you get a reduction or suspension of mortgage payments that will last up to 180 days, which can be extended up to 180 additional days. Don’t just quit making your mortgage payments, though. To get a CARES Act forbearance, you have to contact your servicer and affirm that you've suffered a financial hardship due to the COVID-19 emergency. But you won’t have to provide any other supporting documentation beyond this attestation. Also, homeowners with federally backed mortgage loans, which includes loans that FHA, VA, USDA, Fannie Mae, or Freddie Mac own or insure, get distinct mortgage-payment relief options, like repayment plans and special loan modifications, even after a forbearance. Contact your servicer or the entity that owns or guarantees your loan to learn about available options. If you have a loan that isn’t federally backed, most servicers and lenders offer alternatives to foreclosure, like repayment plans, forbearances, loan modifications, short sales, and deeds in lieu of foreclosure. Contact your servicer as soon as you think you might miss a payment, or shortly after you miss one, to find out if you qualify for a foreclosure alternative. The sooner you deal with the problem, the better.
Getting a forbearance isn't the same as loan forgiveness; so, you'll still owe the amounts you skipped paying after a forbearance ends. Usually, you can pay the past-due amount in a lump sum, with a repayment plan, or through a modification in which the lender adds the unpaid amounts to the balance of the mortgage loan. Your options depend on what entity owns or guarantees your loan. If you have a federally backed mortgage loan, like an FHA, VA, USDA, Fannie Mae, or Freddie Mac loan, you won’t be on the hook to make a lump-sum payment unless you can afford to do so. If some other entity owns your loan—like a bank, mortgage company, or securitized trust—your options depend on what that particular entity offers. Contact your servicer and the loan owner, and check their websites, to get information about repayment alternatives.
The loan owner is the bank or mortgage company that lent you the money when you took out your home loan. Or, if the original lender sold the loan, the purchaser (usually called an “investor”) is the loan owner. The servicer is the company that manages your loan account for the loan owner. In some cases, the loan owner is also the servicer. Other times, the owner sells the right to service the loan to another company. That servicer might then hire a vendor, called a “subservicer,” to take on the servicing duties, rather than servicing the loan itself. The servicer (or subservicer) administers the loan account on behalf of the owner for a fee. The servicer collects and processes monthly mortgage payments, manages escrow accounts, reviews loss mitigation applications, and manages the foreclosure process when a borrower stops making payments. (To determine who owns your mortgage and who services it, read How Do I Find Out Who Holds My Mortgage?)
To get a forbearance, contact your loan servicer and ask for one. If you’re eligible for a CARES Act forbearance, you’ll have to affirm that you've suffered a financial hardship due to the COVID-19 emergency. But the servicer can't require you to submit any other supporting paperwork. If your mortgage loan doesn’t qualify for a CARES Act forbearance, you might have to provide some more information or submit an application to get the forbearance or another loss mitigation option.
If you get a forbearance under the federal CARES Act, you have the legal right to stop the forbearance at any time. If you have another kind of forbearance, contact your loan servicer to find out whether you can stop a forbearance and resume making your regular payments.
If you get a CARES Act forbearance, interest still accrues during the forbearance period. But the servicer can’t add additional fees or penalties, or charge interest beyond what would usually be charged to your account as if you made all contractual payments on time and in full under the terms of the mortgage contract. If you get another kind of forbearance, contact your loan servicer to learn whether you’ll be charged penalties, interest, or late fees. The servicer also has to report your loan account as “current” to the credit reporting if you weren't already behind at the time you enter into the forbearance agreement. Though, it might add a comment to your reports noting that you’re in a forbearance.
The federal government, as well as many states, cities, local areas, and some mortgage companies, have passed laws and issued orders that impose a foreclosure moratorium for specific types of loans and in many places. Also, in most cases, federal law prevents a foreclosure from starting until you’re more than 120 days delinquent on the loan. (Whether this 120-day waiting period can run concurrently with a foreclosure moratorium is unclear at this point, so you should assume that it can.) If your loan is subject to a moratorium, but the servicer initiates or continues the foreclosure while the moratorium is in place, you may file a complaint with your state attorney general’s office. Filing a complaint with the attorney general’s office, however, won't stop the process from going forward. So, to prevent the premature loss of your home, you should also contact a foreclosure attorney to get advice about what to do in your situation. An attorney can help you enforce your rights under both federal and state law, as well as under any orders or policy changes that have happened as a result of the coronavirus national emergency. And, in the meantime, don’t ignore phone calls or letters from your servicer. Communications from your servicer will likely explain any options you have to avoid a foreclosure and how to apply for those options. Also, don’t ignore documents from the court or a foreclosure trustee. Correspondence from the court or a trustee will contain foreclosure information, including important dates—like the sale date—and details about your rights during the process. (Learn more do’s and don’ts during a foreclosure.)
A foreclosure attorney can provide you with advice about what to do in your situation, help you enforce your rights under both federal and state law, and inform you about any orders or policy changes about foreclosure that have happened as a result of the coronavirus national emergency. Once you’ve decided that using a foreclosure attorney is in your best interest, ask friends, family members, coworkers, and other attorneys for referrals. You can also try to find a suitable lawyer using an online directory or by going through your local or state bar association. (Learn more about how to find, hire, and work with a foreclosure lawyer while adhering to quarantine and social distancing rules during the COVID-19 outbreak.)