No Money for Rent or Mortgage? Here’s What to Do
Maybe this time things will be different.
In the aftermath of the 2008 financial crisis, many homeowners complained about the assistance — or lack thereof — from their lenders. Some got help right away. Others had to fight for relief. Mortgage modifications, if you could get one, took too long and often didn’t provide enough of a financial break.
But this time, as the novel coronavirus impacts the earnings of millions of Americans, financial institutions are promising to provide aid immediately, so people can stay in their homes during the pandemic.
There’s no doubt many homeowners and renters will have trouble paying their mortgage or rent in April — and probably in many more months to come. A record 3.3 million Americans applied for unemployment benefits this past week, according to the Labor Department.
Consumers are at risk of falling behind on their credit card and auto payments as businesses shut down because of their customers being asked or ordered to stay home to halt the spread of covid-19.
But regulators and industry groups representing banks and credit unions say they’re prepared to help — and in a meaningful way — having learned some key lessons from the Great Recession.
“We’re talking about huge levels of unemployment at this point in time, and that could last for a longer period of time than what people experienced during the financial crisis,” said Jim Nussle, president and chief executive of the Credit Union National Association. “If that’s the case, credit unions are going to stick with members and work through this with them.”
The American Bankers Association (ABA) is keeping a list of the steps banks of all sizes have taken to respond to the crisis. Lenders are offering payment deferrals with no late fees for mortgage and home equity loans, in some cases up to 120 days.
“As an industry, we want to work and create a seamless process,” said Naomi Gendler Camper, ABA’s chief policy officer. “We want people to come out of this quickly and with as little damage as possible.”
And to assist renters, the Federal Housing Finance Agency (FHFA) announced that Fannie Mae and Freddie Mac, which the agency regulates, will offer multifamily property owners loan deferrals if they promise not to evict tenants.
“This is a situation where we’ve told the landlords, if you give people a break, we’ll give you a break,” said FHFA Director Mark Calabria.
The forbearance program is only available for multifamily units with mortgages backed by Fannie and Freddie, which represents 43 percent of the market. The program also includes aid for single-family residences. About a third of renters live in single-family units, including townhouses, according to FHFA.
Banks and credit unions are also working with customers who can’t pay their auto loans or credit card bills. For example, Ally bank says existing auto customers will be allowed to defer payment for up to 120 days without accruing late fees although finance charges will accrue. Your loan will be extended by the number of months your payment was deferred.
But all this assistance isn’t automatic. So let me walk you through what you should do.
Mortgage holders: Contact your loan servicer right now if you think you can’t make your April payment. Fannie Mae and Freddie Mac have already said they are suspending foreclosures on mortgages they guarantee for 60 days.
Not sure what to ask for or expect? Go to aba.com and search for “Industry Responds to the Coronavirus” to see what relief institutions are offering. You can find a survey of what credit unions are doing at americascreditunions.org. For example, Everglades Federal Credit Union in Florida is offering interest-only loan repayment. Mortgage loan assistance is made on a case-by-case basis. Partial payments are on the table in addition to payment suspensions, typically for 90 days.
And, I understand you want to preserve your cash, but financial institutions are overwhelmed. If you can make your payment, wait before asking for a delay.
Calabria said lenders are reporting that 70 percent to 80 percent of the calls they’re getting are from borrowers who aren’t facing an immediate hardship.
Renters: Although various jurisdictions have temporarily halted evictions, you should still call your landlord to explore your options. Often when people can’t pay they retreat and fail to communicate. That’s sure to make things worse when the eviction freezes are lifted. Keep in mind that even if your landlord is able to get a forbearance for their mortgage, you’ll likely have to catch up on the missed rent payments later.
I want to hear from you. Let me know if you encounter any problems in getting financial relief from your bank or credit union. I hope the institutions keep their word to provide as much support as possible, because this crisis looks like it will be long — and it could be financially deadly for a lot of folks.
Posted on washingtonpost.com on 3/28/2020.