We understand that this is a confusing and scary time for many homeowners during the COVID-19 pandemic. Many of you are wondering how you might make your next mortgage payment and what options you might have for protecting your families financially. The Center for NYC Neighborhoods is here to help homeowners like you bring much needed stability to your home and finances during this unprecedented crisis. Some mortgage relief measures have already been put in place, and new efforts to help homeowners are still being announced. We’ve gathered the most up-to-date information and resources on mortgage help below.
First, contact your mortgage servicer
If you’re worried about missing a mortgage payment, you should contact your servicer to discuss options — such as forbearance or payment plans. Your servicer may detail available options on their website, so you may be able to save time by contacting them online and, in some cases, apply for relief on the spot. It is important to take action while you’re still current; failure to do so could affect your options.
Forbearance can be complicated — make sure you understand how it works
The federal government and states are requiring most mortgage servicers to offer “forbearance” to homeowners having trouble paying right now. Forbearance allows you to stop making mortgage payments without fear of immediate foreclosure. But this is not a “mortgage holiday” — you still owe the missed payments and will need to make them up somehow when the forbearance ends. It is important to continue to work with your servicer when the forbearance ends; we can connect you with a housing counselor that can assist you.
- Ask your servicer these questions about what will happen at the end of a forbearance:
- Will I be asked to make up all the missed payments at once, in a lump sum?
- What options are available if I cannot afford to resume my normal monthly mortgage payment at the end of the forbearance?
- How do I extend the forbearance if I still need more time at the end?
- Will you report negative information about me to the credit bureaus during or after the forbearance?
- Will you be sending a written agreement that summarizes the terms of the forbearance plan?
While you’re in the forbearance period, there are a few things you can do to protect yourself:
- Pay attention to your monthly mortgage statements so you can ensure that it reflects the assistance provided in the forbearance.
- If you have your mortgage payment automatically deducted from your bank account, adjust or stop auto-payments for your mortgage.
- Check your credit reports to keep an eye on your credit.
Your mortgage “investor” affects your options for avoiding foreclosure
The entity that owns or funded your loan is referred to as the “investor.” Although the mortgage servicer for a loan — the entity you make your payments to, and sends you mortgage statements — may change over time, the investor usually does not. There are two main investor types: private and federal. Most mortgages in the United States have a federal investor, e.g., the FHA, VA, Freddie Mac, and Fannie Mae.
If your loan is owned by a federal investor, you should be able to request forbearance of up to 180 days, and extend it by another 180 days if needed. Federally-backed mortgages should not be foreclosed on at least through December 31, 2020, under federal investor requirements. And homeowners who enter into a COVID-19 forbearance on a federally-backed mortgage should not be required to pay back missed payments in a lump sum when the forbearance ends.
If your loan does not have a federal investor, these federal forbearance terms may not apply. However, if your home is located in New York State, you may have similar COVID-19 forbearance protections thanks to recent changes to state banking law.
New York State Banking Law 9-x requires servicers of private mortgages to offer forbearance to homeowners who demonstrate a financial hardship as a result of the COVID-19 pandemic. These state-mandated forbearances must be for up to 180 days, with extensions of 180 days available.
At the end of a state-mandated forbearance, homeowners must be offered the option of extending the term of the loan; repaying missed payments on a monthly schedule; negotiating a loan modification; or moving all missed payments into a non-interest bearing balloon loan due upon sale, refinance, or maturity of the loan.
If you don’t know who your mortgage investor is, you can contact your servicer. The servicer must provide you, to the best of its knowledge, the name, address, and telephone number of who owns or backs your loan. Additionally, the Consumer Financial Protection Bureau has more information on how to identify your loan’s investor here.
After your COVID-19-related forbearance plan ends.
If you need more time to get back on track after an initial forbearance period of up to 180 days ends, you may be able to extend your forbearance if you need additional time. If you have a federally-backed mortgage or state protections apply to your loan, you can defer mortgage payments up to a year in total. This also means you’ll have to reach an agreement on how to repay one year’s worth of missed mortgage payments. It is important to keep in mind that, eventually, you will need to have a plan to make up the payments.
Listed below are some of the options that may be available:
- Reinstatement: This simply means catching up on all the missed payments at once in a single lump-sum payment. After the loan is reinstated, you would continue to pay their mortgage under the original pre-forbearance terms.
- Repayment Plan: You would spread out the missed payments and repay them over a set time frame by adding to your monthly mortgage payments. After the repayment plan is complete, you would continue to pay your original mortgage payment.
- Loan Modification: If you have experienced a permanent impact to your ability to pay your regular monthly mortgage payment, a loan modification may be a good option. A modification works by adjusting the terms of your mortgage to reduce the monthly payment.
It’s OK if you’re confused. We’re here to help.
Be aware that scammers are actively posing as helpers for those struggling with the impacts of the virus. You should remain vigilant in protecting your home and finances. The Consumer Financial Protection Bureau is tracking known scams related to coronavirus. No one from the Centers for Disease Control or your mortgage servicing company should be stopping by your home.
If you’re concerned about scams or making your mortgage payment, we recommend that you get free advice from a counselor during these challenging times. Housing counselors can help you understand the full range of relief options available, including which mortgage forbearance and loan modification options you should apply for based on your individual circumstances. Give our Homeowner Hub a call today at (646) 786-0888 or by going to our online form. We can refer you to a local, community-based organization for help.