Under the recently enacted CARES act that is providing $2 trillion in federal bailout funding financial institutions like mortgage companies, banks and online lenders now have to allow people who have lost their job or seen a significant reduction in income to make reduced payments or to skip payments (for at least 3 months).
Who is Eligible?
You will need to show evidence of financial hardship directly or indirectly (e.g caring for a family member) related to the coronavirus outbreak that makes you unable to meet basic living expenses.
If you have a mortgage loan backed by Fannie Mae and Freddie Mac (about 50% of borrowers), then the lender that actually services that loan for you (e.g. Bank of America or Wells Fargo) are required to give you an option that does not raise your monthly payment.
How can I apply for this?
Many lenders have already got assistance in place and have likely already sent you information. For example many banks are refunding fees and ensuring any delays have no negative credit bureau reporting. The federal mandate however provides specific funding to address big ticket financial hardships which many Americans may be feeling.
You will need to contact your financial institution/lender to ask for financial hardship relief and if you have challenges with that contact your local state agency. Make sure you ask them to give you all options in writing so you know what you are getting and not caught by surprise with any future impacts.
Note that the hardship relief does not mean you stop paying bills! And when things improve you will have to get current again.
Homeowner Forbearance and Relief
If a homeowner has lost their job and needs relief, there are several options available if Freddie Mac or Fannie Mae owns their mortgage, including a forbearance option for those who’ve lost their jobs due to the Coronavirus crisis. Generally, the financial institutions to whom borrowers send their mortgage payments each month don’t own the mortgage – they are just “servicing” the mortgages for Freddie Mac or Fannie Mae.
The flood gates are about to open in terms of borrowers seeking relief from their lenders, so it’s best to get ahead of this if possible. I’m also happy to answer questions.