How new legislation, CARES Act will affect mortgages on your home during COVID-19 pandemic
Many homeowners struggling financially during the coronavirus pandemic are worried that mortgage servicers are now requiring them to repay postponed mortgage bills all at once after allowing them to put off those payments under the CARES Act.
The Consumer Financial Protection Bureau, however, has called on mortgage servicers to clear up the confusion over the issue since consumers can put off payments — a process known as forbearance — for up to a year due to the new act. The law, however, doesn’t specify what happens after forbearance ends, which has led some mortgage services to warn borrowers they will have to make balloon payments.
“We’re seeing a significant increase in complaints from borrowers,” Kathleen L. Kraninger, director of the CFPB, said Friday during a call with reporters. “There’s a crystal clear line on the lump-sum payment issue. They’re not going to have to pay it if they can’t pay it.”
In April, the CFPB received 42,774 complaints, the highest number in the history of the bureau’s complaint system and about a 15% increase from March.
Topping the list of coronavirus related complaints were concerns about mortgages and credit cards. Consumers were typically concerned about their ability to pay a lump sum once their mortgage forbearance ends. About 60% of the mortgage complaints related to the coronavirus are from people struggling to pay their home loans, Kraninger said.
Get me out of here!: Americans flee crowded cities amid COVID-19, consider permanent moves
The bureau is working with the Department of Housing and Urban Development, which oversees the Federal Housing Administration, to streamline information to borrowers so that they know their rights, Kraninger said.
“If a consumer still has a concern and if they don’t seem to be getting relief they need, they can come to us,” Kraninger says. “We’ll take an aggressive posture against those who are not accommodating consumers the way they should.”
How do I get forbearance?
Forbearance allows you to pause or reduce your mortgage payments, but you still have to repay those missed payments in the future.
To receive forbearance through the CARES Act, you must contact your loan servicer. Homeowners who are struggling financially because of the pandemic can request a forbearance for up to 180 days, which may be extended for an additional period of up to another six months if borrowers are still under financial duress.
This relief applies only to federally-backed mortgages. If you don’t have a federally backed mortgage, some loan servicers may have forbearance or deferment options for non-government-backed or private loans.
What options are available when forbearance ends?
The Federal Housing Finance Agency, which dictates guidelines for Fannie Mae and Freddie Mac-backed loans, said borrowers with federally-backed mortgages who obtain a forbearance due to the coronavirus crisis aren’t required to make a balloon payment when relief ends.
Mortgage servicers will contact borrowers 30 days before the end of forbearance to go over repayment options. If the hardship has not been resolved, the forbearance plan can be extended, FHFA said in a statement.
If the hardship has been resolved, the servicer will work with the borrower to either set up a repayment plan, modify the loan so the borrower’s payments are added to the end of the mortgage or set up a modification that reduces the borrower’s monthly mortgage payment, FHFA said.
If you don’t anticipate a substantial loss of income during the pandemic, financial planners say you should pay your mortgage as usual.
Can I negotiate?
To understand your options, you may be able to work with housing counselors who can provide advice for little or no cost, according to the CFPB. These professionals will work with you to evaluate your situation and help you negotiate with your mortgage lenders and servicers.
HUD-approved housing counselors can discuss options if you’re having trouble paying your mortgage loan or reverse mortgage loan. This may also include forbearance or a modified payment program.
If you need a lawyer, there may be resources to assist you through your local bar association or legal aid.
How do I file a complaint?
If you’re having trouble getting the relief you need, you can submit a complaint with the CFPB.
First, you’ll need to include details like dates and amounts in your complaint. If you have documents you want to include, such as billing statements or letters from the company, you’ll also be able to include them. Be sure to include as much detailed information as possible because you typically can’t submit a second complaint about the same problem.
You’ll receive email updates and can log in to track the status of your complaint. It generally takes about 15 days to get a response.
Read or Share this story: https://www.usatoday.com/story/money/2020/05/05/coronavirus-what-do-if-you-face-balloon-payments-your-mortgage/3044925001/