Consumer Financial Protection Bureau (CFPB) Issues Coronavirus Mortgage Relief Options
The CFPB is the federal agency tasked with protecting consumers against financial-services organizations like banks and mortgage servicers. The mortgage guide covers information on what options are available for homeowners needing relief from their mortgage payments due to the coronavirus (COVID-19).
The guide distinguishes between homeowners not suffering financial difficulty because of coronavirus, and those who are. For those who are still employed and can afford their mortgages, they should continue paying.
For those who cannot pay their mortgages due to layoffs or job loss, there are two major forms of relief that are offered under the CARES Act, the federal law creating the mortgage relief programs.
First, there is a foreclosure moratorium. Banks and mortgage servicers are prohibited from foreclosing for 60 days effective March 18, 2020. This prohibits judicial or non-judicial foreclosure, as well as finalizing a foreclosure sale. Massachusetts uses non-judicial foreclosure, so this means that any foreclosures that had been scheduled are now canceled and may not be rescheduled, at least for the time being.
What will happen after the 60-day period? It remains to be seen. If the coronavirus pandemic continues then these deadlines could be extended. Congress is presently in talks about how to continue to provide relief.
The second option is a forbearance of up to 180 days, or six months. This may be extended by another 180 days. A forbearance is when your mortgage company voluntarily allows you to not make any payments for a period of time There should be no late fees or penalties added to your account. The only catch is that for some mortgages it is unclear what will happen after the forbearance period is over. Homeowners will certainly be required to repay the unpaid amounts, but the terms for repayment are not yet clear. For mortgages back by the FHA, the unpaid amounts will probably be put into a separate obligation called a partial claim that has to be repaid if you sell or refinance your house.
What’s the catch? These options only apply to mortgages backed by Fannie Mae, Freddie Mac, the FHA, the VA, and the RHS. This covers almost two-thirds of mortgages, but it leaves the remaining third in limbo. That said, in Massachusetts most or all foreclosures have been canceled, in our office has heard that most banks are offering forbearances regardless of who owns or affects the mortgages.
Massachusetts has been at the forefront of protecting homeowners. The Division of Banks issued an industry guidance letter stating that foreclosures should be postponed, late fees should be waived, and credit reporting should be suspended. The letter also stated that banks who do not comply with this advisory opinion may be subject to “examiner criticism” when it comes time to evaluate their actions.
The CFPB guide says to call your mortgage servicer and to be prepared to answer questions about what your hardship is. You may need to explain whether your problem is temporary or permanent, while you are unable to make your payment, and information about your income, assets, and expenses.
The important questions to ask, according to the CFPB, are what the specific options are to help you, and whether a forbearance, loan modification, or other option is available. You should also ask whether your mortgage’s late fees will be waived.
A final piece of advice from the CFPB, according to their guide. Our office agrees with this entirely. Get it in writing! Make sure you have something from your bank or mortgage servicer stating what the terms of your agreement are. As some may recall from the mortgage meltdown a decade ago, banks and mortgage servicers routinely made promises that they never followed through on, and because many of these promises were not in writing homeowners had to take legal action to defend their rights.
In short, contact your bank or mortgage servicer, ask what the options are for a forbearance or loan modification, accept what seems reasonable, and make sure you get it in writing. When you speak on the phone, get the name and employee ID of everyone you speak with so that you can make a note about your conversation in case you need to prove it later.
The CFPB guide to coronavirus mortgage relief options is linked here: Guide to Coronavirus Mortgage Relief Options
There are sure to be many forbearances, loan modifications, and other mortgage workout options that result from the coronavirus pandemic. Those who are diligent are likely to be the ones who are helped most.
Our office has been helping Massachusetts homeowners with mortgage issues like defaults, foreclosures, and loan modifications for over a decade. If you need help, contact us to see if we can assist you.