Coronavirus Rental, Mortgage and Credit Card Payment Relief Coming Fast - UPDATES 3-23-20 - The Basis Point
Last week brought shocking projections of economic meltdown near-term. From here forward, coronavirus rental relief, mortgage relief, and credit card relief will keep coming fast. Below are critical updates on how it’ll work and how to get relief if you’ve lost a job and/or income.
2020 VS. 2008 MORTGAGE CRISIS RELIEF
It’s disastrous if the economy shrinks 12% or 24% between now and June like Bank of America and Goldman Sachs projected last week, respectively. It means millions would lose jobs and income.
But so far banks and regulators are treating 2020 coronavirus crisis relief like disaster response. This is encouraging compared to the avoid-the-toxic-asset response of 2008.
2008 CRISIS RESPONSE SLOWED BY BAD LOANS & OVERVALUED HOMES
This isn’t a slow-bleed economic meltdown born from bad loans and overpriced homes like in 2008.
Back then, you couldn’t apply for aid until you started missing mortgage payments.
Sounds crazy but that’s what happened.
Loans made without verifying borrowers’ ability to repay fueled excessive home price gains.
So home price declines were a long slog that began by waiting until loans went bad.
2020 CRISIS RESPONSE LOOKING MORE LIKE RAPID NATURAL DISASTER RELIEF
Now banks and regulators are treating this more like a natural disaster scenario.
Here’s the mindset of regulators and banks: this will be a temporary (albeit very severe) displacement so let’s try to provide a lifeline to impacted Americans.
Below is a recap of what’s happening to help mortgage holders and renters.
RENTERS, PLEASE REMEMBER:
Landlords have mortgages to pay, so regulators can’t just order landlords to stop collecting rent.
It’s all connected as follows:
Regulators must allow banks to allow mortgage relief, which then helps landlords help renters.
See Coronavirus Rental Relief section below for details on how it’ll work, and how to get help.
CORONAVIRUS HOME OWNER RELIEF
Instead of waiting for you to stop paying mortgages and eventually foreclosing on homes, banks now have government permission to help you.
Top home loan regulator FHFA (Federal Housing Finance Agency) said it would allow banks to halt foreclosures and evictions for at least 60 days.
The FHFA announcement has technical language, so below I excerpt key sections and explain each one:
THIS IS FHFA SAYING BANKS CAN PAUSE MOST MORTGAGES THEY’VE MADE TO YOU IF YOU NEED RELIEF. BUT YOU’LL NEED TO DOCUMENT YOUR CORONAVIRUS HARDSHIP:
Earlier this month, FHFA announced that the Enterprises would provide payment forbearance to borrowers impacted by the coronavirus. Forbearance allows for a mortgage payment to be suspended for up to 12 months due to hardship caused by the coronavirus.
THIS IS FHFA TELLING BANKS THEY CAN HALT EVICTIONS AND FORECLOSURES ON MOST MORTGAGES MADE TO YOU FOR AT LEAST 60 DAYS:
– To help borrowers who are at risk of losing their home, the FHFA has directed Fannie Mae and Freddie Mac (the Enterprises) to suspend foreclosures and evictions for at least 60 days due to the coronavirus national emergency.
THIS IS FHFA TELLING YOU TO CONTACT YOUR BANK IMMEDIATELY FOR HELP IF YOU NEED CORONAVIRUS MORTGAGE RELIEF:
Borrowers affected by the coronavirus who are having difficulty paying their mortgage should reach out to their mortgage servicers as soon as possible. The Enterprises are working with mortgage servicers to ensure that borrowers facing hardship because of the coronavirus can get assistance.
WHAT DO YOU MEAN “MOST MORTGAGES” ARE ELIGIBLE FOR CORONAVIRUS MORTGAGE RELIEF?
In my explanations above, I say “most mortgages” are eligible for relief.
Why? Because the FHFA regulates Fannie Mae and Freddie Mac, which back most mortgages that banks and lenders make to you.
Now the FHFA has told Fannie Mae and Freddie Mac to tell banks and lenders it’s ok to help you.
How do you know if Fannie or Freddie backs the loan you pay to your lender each month?
Banks and lenders are acting fast to allow you to stop paying your mortgage, credit card, or other loan for awhile.
But they have lots of rules to follow from FHFA and several other regulators like the Fed, FDIC, CFPB, OCC, NCUA, and CSBS.
The names of all these regulators are less important to you.
What’s important is that today these regulators jointly issued a letter allowing banks to give you relief … IF coronavirus is disrupting your ability to pay mortgages, credit cards, or other banking obligations.
The regulator letter has technical language, so below I excerpt key sections and explain each one.
THESE THREE BULLETS ARE REGULATORS TELLING BANKS TO PAUSE YOUR CREDIT CARD, MORTGAGE, OR OTHER LOANS IN SOME WAY. BUT YOU’LL NEED TO DOCUMENT YOUR HARDSHIP:
– The agencies encourage financial institutions to work prudently with borrowers who are or may be unable to meet their contractual payment obligations because of the effects of COVID-19.
THIS IS REGULATORS TELLING BANKS IF THEY HELP YOU FAST, THEY WON’T HAVE ALL THE COMPLIANCE AND ACCOUNTING RED TAPE NORMALLY ASSOCIATED WITH HELPING YOU:
– The agencies will not criticize institutions for working with borrowers and will not direct supervised institutions to automatically categorize all COVID19 related loan modifications as troubled debt restructurings (TDRs). The agencies will not criticize financial institutions that mitigate credit risk through prudent actions consistent with safe and sound practices.
THIS IS REGULATORS CONFIRMING THEY’RE TREATING RELIEF LIKE A NATURAL DISASTER SCENARIO, WHICH IS A DRASTICALLY DIFFERENT APPROACH THAN IN 2008:
– The agencies consider such proactive actions to be in the best interest of institutions, their borrowers, and the economy. This approach is consistent with the agencies’ longstanding practice of encouraging financial institutions to assist borrowers in times of natural disaster and other extreme events.
THIS IS REGULATORS TELLING BANKS THEY’VE GOT LESS RISK HELPING YOU AS LONG AS YOUR MORTGAGE WASN’T ALREADY LATE OR IN FORECLOSURE:
-The FRB, FDIC, and OCC note that efforts to work with borrowers of one-to-four family residential mortgages as described in the modification section of this document, where the loans are prudently underwritten, and not past due or carried in non-accrual status, will not result in the loans being considered restructured or modified for the purposes of their respective risk-based capital rules.
THIS IS REGULATORS SUGGESTING TO BANKS THAT ANY RELIEF THEY GIVE YOU SHOULDN’T HIT YOUR CREDIT REPORT:
– With regard to loans not otherwise reportable as past due, financial institutions are not expected to designate loans with deferrals granted due to COVID-19 as past due because of the deferral. A loan’s payment date is governed by the due date stipulated in the legal loan documents. If a financial institution agrees to a payment deferral, this may result in no contractual payments being past due, and these loans are not considered past due during the period of the deferral.
BANKS WILL HELP YOU BUT THEY’RE VERY HIGHLY REGULATED, SO…
You must be prepared to document your hardship when you ask for help.
They need documentation to classify your file as having been eligible to receive assistance.
This will help you avoid potential credit report damage when you get relief.
And it’ll ensure the bank is following the proper consumer protection laws when they help you.
CORONAVIRUS RENTAL RELIEF
Now back to coronavirus rental relief.
As noted above, landlords have mortgages to pay so regulators can’t just order landlords to stop collecting rent.
It’s all connected as follows:
Regulators must allow banks to allow mortgage relief, which then helps landlords help renters.
GREAT NEWS: Today a top housing regulator (the FHFA) said:
“Renters should not have to worry about being evicted from their home, and property owners should not have to worry about losing their building, due to the coronavirus.”
This announcement also contains technical language, so below I excerpt key sections and explain each one.
THIS IS FHFA SAYING THEY’LL LET APARTMENT BUILDING OWNERS WTIH FANNIE/FREDDIE-BACKED MORTGAGES PAUSE PAYMENTS IF THEY PAUSE RENTAL PAYMENTS FOR RENTERS IMPACTED BY CORONAVIRUS:
– To keep renters in multifamily properties in their home … the FHFA is announcing that Fannie Mae and Freddie Mac (the Enterprises) will offer multifamily property owners mortgage forbearance with the condition that they suspend all evictions for renters unable to pay rent due to the impact of coronavirus.
THIS IS FHFA SAYING APARTMENT BUILDING OWNERS MUST BE CURRENT ON THEIR FANNIE/FREDDIE-BACKED MORTGAGE TO QUALIFY FOR MORTGAGE RELIEF:
– The forbearance is available to all multifamily properties with an Enterprise-backed performing multifamily mortgage negatively affected by the coronavirus national emergency.
HOW TO GET CORONAVIRUS RENTAL RELIEF, MORTGAGE RELIEF, CREDIT CARD RELIEF
So what do you do next?
Everything above is to show you the chain of how relief works.
First the government has to tell banks and lenders they’re allowed to help.
Then the banks and lenders can help you directly.
So you don’t have to understand every word of what’s above.
JUST CONTACT YOUR BANK OR LANDLORD IMMEDIATELY IF YOU NEED RELIEF.
Certain mortgages and other loans won’t qualify for relief, but it’s fastest to call your bank to find out.
Also, if you were already late on loans before coronavirus broke out, you might not qualify.
Either way, contact your bank or landlord IMMEDIATELY to sort out options.
CRITICAL NOTES FOR RENTERS & LANDLORDS
Your landlord might not even know about these new options.
So if your landlord doesn’t understand their options, send this post to them.
This post includes technical language and government links for them to verify their eligibility to help you.
Even then, they won’t go to the government for help in most cases.
They must ask their lender to confirm if they can pause your rent and pause their mortgage.
Once your landlord confirms this with their lender, they’ll most likely come back to you and ask for documentation of your coronavirus hardship.
If your landlord does as for documentation, ask them to show their bank’s request for this documentation before you send it.
CONTACT ME WITH QUESTIONS
Please reach out if you have questions, or more information on coronavirus rental relief, mortgage relief, credit card relief, or other banking relief. If you’re looking to buy but are struggling, explore all the options, even the rent-to-own method.
And please enter your email in the box below (or on the sidebar) subscribe for updates.
