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Mortgage Forbearance and Covid-19

Author Yuriy Moshes

With the onslaught of COVID-19 devastating New York’s economy resulting in crippling both the employment and mortgage sectors of not only New York City, but throughout the entire state, many homeowners have had no choice but to forego their mortgage, resulting in late payments and unpaid monthly mortgages. In fact, nationally, in April of this year, there were a recorded 3.6 million Americans who were delinquent on their mortgage. This represents an increase of 6.45 percent in April, which was 3.06 in March. This April figure also represents the highest number of past due mortgages recorded since 2015 during the Great Recession.

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More recently, according to a recent survey, eleven percent of respondents, including both renters and owners, reported paying their rent or mortgage for August by the end of the first week of the month. 22 percent reported making none at all, a slight increase from July, which was 19 percent. This represents a significant increase compared with April, in which 12 percent were unable to pay on time.

Fortunately, both the federal and state government have offered coronavirus mortgage relief in response to hundreds of thousands of homeowners being affected by the coronavirus mortgage crisis and being in default on their coronavirus mortgage due to loss of income. Consequently, many homeowners have turned to these mortgage relief coronavirus programs for help.

This article shall explore these mortgage forbearance programs and government programs to help pay mortgages and help with mortgage payments. Moreover, we shall discuss the importance of an attorney and how they can help you with aid relief and economic assistance for your mortgage.

What Is a Mortgage Forbearance?

When a homeowner is behind on their mortgage, they may try to utilize a mortgage forbearance program, which is an agreement between the homeowner and the lender regarding the mortgage owed. Such an agreement typically results in either the mortgage debt being either reduced or stalled for a certain period of time. Mortgage forbearance agreements, however, do not erase the amount owed for your home loan. It simply just buys the homeowner some additional time in that any missed payments or reduced rates will still have to be paid back by the homeowner eventually.

Mortgage forbearance agreements can still be very helpful because it often suspends the amounts owed for a designated limited period of time or forbearance period, allowing the homeowner a chance to catch up financially, and then once that limited period of time has expired, payments resume as agreed to.

mortgage coronavirus

A perfect example of a cause of mortgage forbearance is due to the coronavirus or COVID-19. Not only has the federal government enacted mortgage forbearance programs, but New York and many private lenders have enacted their own form of mortgage forbearance, allowing its borrowers relief during this COVID-19 pandemic. The rationale behind such grand legislation and banking policies has to do with the idea that the borrower should not be penalized for the pandemic and be forced out of their homes due to this Act of God. Accordingly, this relief allows the homeowners to be able to try to get better situated financially before the limited period of time runs up and mortgage payments begin again. Although the mortgage payments are still owed, the homeowners are given time during this coronavirus pandemic to organize, plan, and do what they need to do before payments start up again.

Accordingly, it is important to contact an attorney to provide you the information and different options that are available to you.

What Is the Cares Act?

The Federal Cares Act, or the CARES Act Loan or what is officially known as the Coronavirus Aid, Relief, and Economic Security Act, is a $2.2 trillion government sponsored enterprise or bill passed by U.S. Congress which went into effect on March 27, 2020 in response to the financial destruction caused by COVID-19 pandemic throughout the nation.

In terms of mortgages, the Cares Act provides for general mortgage forbearance for all homeowners with mortgages, including those with federal mortgages and those with private mortgages.

Specifically, first, for those homeowners with federally backed mortgages or GSE-backed mortgages, such as Fannie Mae or Freddie Mac, the Cares Act provides that in that particular case, no lender may foreclose on the homeowner until the end of the year, or December 31, 2020. This stalled foreclosing on homeowners and restricted proceeding with or beginning any type of foreclosure proceedings at all, including both judicial and non-judicial. The CARES Act began March 18, 2020 and currently extends to December 31, 2020. Furthermore, there is a chance that the CARES Act could be extended even after December 31, 2020. It is also important to note that if any of the mortgage is federally financed, even if just partial, the CARES Act is applicable. Accordingly, it is necessary to have a mortgage attorney review your mortgage to see if this portion of the CARES Act applies, even if you think that your mortgage is entirely privately financed.

Second, for those homeowners who do not have federally financed mortgages, the CARES Act provides mortgage forbearance by giving those homeowners the right to request and obtain a forbearance for up to 180 days. Additionally, once that 180 days runs out, the Cares Act provides for that homeowner to request and apply for another 180 day extension. The Act provides that no additional fees, penalties, or interest will apply. Furthermore, no additional documentation needs to be submitted other than your basic claim that you are experiencing financial hardship due to COVID-19 and are unable to make your monthly mortgage payment.

Although the above sounds simple enough, and it is, it is highly advisable that you contact an experienced mortgage attorney to explain in detail how the CARES Act works, how it can benefit you, and whether you may qualify.

Government Programs to Help Pay Mortgage

Although the COVID-19 pandemic has caused a devastating impact on the economy, fortunately, there are some government programs, some under the housing and urban development and department of housing, that may provide some mortgage relief. This includes:

  • Home affordable unemployment program. This is a federal assistance program that helps homeowners stay in their homes so that they can avoid foreclosure. Specifically, this program reduces or all together completely suspends mortgage payments for 12 months or more for homeowners who find themselves unemployed and unable to make their monthly mortgage payments. In order to qualify, homeowners must be receiving unemployment benefits, owe less than $729,750 toward your mortgage, and live in your home
  • Principal reduction alternative. With over 100 loan providers involved, this is a federal program that encourages mortgage lenders to reduce the mortgage rate owed by the homeowner. In order to qualify, homeowners must not already have an existing Fannie Mae or Freddie Mac loan, owe less than $729,750.00, the monthly payment is less than 31% of your income, your mortgage is earlier than 2009, and some other qualifications.
  • Loan mortgage modification plan. Under a loan modification plan the homeowner’s mortgage payments are reduced or modified so that the loan principal is reduced, the interest rate is reduced, or the life of the loan is extended. In order to qualify, the homeowner must demonstrate extreme financial hardship to the lender, if the lender offers such a program.

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Discussing your situation with an experienced mortgage attorney may give more options to the homeowner about what other government programs are available for payment relief.

Help With Mortgage Payments

Besides seeking government assistance and loan modifications, probably the most effective way to deal with your mortgage payments is entering into some sort of forbearance program with your lender and/or bank. As stated earlier, due to the widespread and horrible impact COVID-19 has had on not just New York City and New York State, but the entire country itself, hundreds of thousands of homeowners, just like yourself, have been impacted and are unable to pay their monthly mortgage payments. You are not alone and your situation is not unique.

As a result, almost all banks and financial lenders offer some sort of mortgage forbearance assistance or coronavirus aid relief allowing your mortgage payments to be, at the very least, suspended or reduced, allowing you the chance with time to breathe again and try to regroup yourself so that you are able to get back in the workforce so that you can resume your monthly payments like you had made before.

Mortgage forbearance does not eliminate your debt or the money you owe. It does, however, give you a grace period to become financially stable again so that you start making the payments. Again, the theory behind mortgage forbearance, especially in an economic crisis like the COVID-19 pandemic that we are currently experiencing, is that if mortgage forbearance was not permitted, millions of other homeowners across the nation would be out of their homes due to no real fault of their own.

mortgage relief coronavirus

Accordingly, when talking with an attorney, they can help assist you in the mortgage forbearance process and how to apply.

FAQ 

Is mortgage forbearance a good idea?

Yes, if you are having mortgage problems and absolutely are unable to make your monthly mortgage payments, mortgage forbearance is definitely a good idea. The alternative is to lose your home. Millions of other people are being affected by COVID-19 crisis and can’t make their payments due to job loss and the economy. Mortgage forbearance was designed for emergencies such as the one this nation is facing.

What is the mortgage relief program?

The Mortgage Relief Program is the set of government forbearance programs that are offered to homeowners who are unable to make their payments due to the COVID-19 pandemic. These programs prevent the homeowners from being evicted from their homes by suspending foreclosure proceedings that may already be in progress.

What is a forbearance agreement?

A forbearance agreement is an agreement between the homeowner and lender in which the parties agree that all mortgage payments are temporarily suspended for a limited period of time. Although the mortgage is not completely eradicated or dissolved, the limited time suspension does allow the homeowner the time allowed to reorganize so that payments can resume. No interest or penalty is given to the homeowner under this agreement.

What is a forbearance plan?

A forbearance plan is also known as a forbearance agreement. Under such a plan, the homeowner and lender agree that the homeowner’s mortgage payments are suspended for a certain period of time. This allows the homeowner a chance to breathe so that they can get back on their feet and develop relief and economic security to make payments.

How does mortgage forbearance work?

Mortgage forbearance suspends the mortgage payments that the homeowner must make for a limited period of time. In theory, this allows the financial crisis to subside, giving the homeowner the chance to reorganize themselves to allow them to resume making payments.

How many people can be on a mortgage?

Generally, there is no limitation in number but it all depends on the type of mortgage.

What happens after a forbearance agreement?

Once the forbearance agreement is signed, the homeowner has a limited period of time to try to become employed or to reorganize their finances so that they can resume making their monthly mortgage payments. Once that period of time has expired, the homeowner must resume payments.

What is a mortgage moratorium?

A moratorium is an executive order given by either the President of the U.S. or by the Governor of the State. Governor Cuomo issued a State moratorium on both residential and commercial real estate evictions on March 20, making sure that no tenant was evicted due to COVID-19, including small business. The commercial eviction and foreclosure moratorium was extended through August 20 by Executive Order. The Governor signed the Tenant Safe Harbor Act and additional legislation to protect residential renters and homeowners from foreclosure or eviction due to a COVID-19.

Does a mortgage forbearance affect your credit?

No. Mortgage forbearance won’t negatively affect your credit or make your credit scores go down if you successfully complete the program and pay back the mortgage amounts deferred.

Will mortgage companies defer payments?

Yes. Under a mortgage forbearance plan, mortgage companies will defer payments, some up to 180 days and then 180 days thereafter.

Does forbearance affect your credit?

No. Mortgage forbearance won’t negatively affect your credit or make your credit scores go down if you successfully complete the program and pay back the mortgage amounts deferred. This may change.

How many times can you apply for forbearance?

There is no limit to how many times you may apply. The CARES Act provides mortgage forbearance by giving those homeowners the right to request and obtain a forbearance for up to 180 days. Once that 180 days runs out, the CARES Act provides for that homeowner to request and apply for another 180 day extension. Private lenders will have their own limitations.

How to get help with your mortgage?

There are different government programs that offer mortgage relief assistance and options. You should contact a mortgage attorney to discuss your individual situation and they can explain what options are available to you.

Is there a way to skip a mortgage payment?

Yes. Under the mortgage forbearance program, you can skip your monthly mortgage payments for a limited period of time. You still have to pay your mortgage and a mortgage forbearance does not eliminate any of your mortgage, but it does allow you the chance to breathe until you’re on your feet again to resume making your regular payments.

What happens when i can’t pay my mortgage

If you are unable to pay your mortgage, rather than do nothing, you should contact an attorney to discuss your options. Rather than risk foreclosure from your mortgage servicer, you should consider a mortgage forbearance.

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Risking foreclosure is a scary fact but it doesn’t have to become a reality. During this COVID-19 pandemic, there are options to help homeowners and an experienced attorney can help explain the process and options available to you.

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A qualified attorney from the Law Office of Yuriy Moshes can provide you assistance and knowledge about your mortgage loan, the economic security care act, and potential forbearance plans. Their offices help homeowners in the New York City area including all its boroughs (Manhattan, Brooklyn, Queens, the Bronx and Staten Island) as well as Northern New Jersey, Long Island, and Upstate New York.

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