Who could have predicted a year ago how the coronavirus (COVID-19) global pandemic would cause such social and economic uncertainty?
According to this recent economic forecast, the housing market faces its greatest challenge in over a decade as large swaths of the U.S. economy shut down to battle the COVID-19 pandemic.
Most homeowners spend months researching and preparing for the homebuying process, and there’s plenty of information out there to help them with that search. When faced with an unexpected crisis, it’s much harder to plan for the unexpected while finding out what mortgage relief options are out there.
Therein lies the challenge. Homeowners impacted by sudden hardship are having to learn, practically overnight, all that they can about relief options.
Millions of Americans are in the same boat right now, and servicers are on the front lines, fielding their questions and guiding homeowners towards sustainable homeownership.
As the effects of COVID-19 on people and businesses continue to evolve, up-to-the minute policy updates are available to support servicers and homeowners, including:
- Providing mortgage forbearance for up to 12 months
- Waiving assessments of penalties and late fees
- Suspending all foreclosure sales through June 30, 2020
- Offering loss mitigation options that lower payments or reinstate the mortgage to “current” status while keeping payments the same after the forbearance period
Setting the record straight on forbearance
There’s a lack of understanding in the industry – especially among homeowners – about relief options and how the process works. Let’s zero in on one of the most common mortgage relief options: forbearance.
Forbearance is when your mortgage servicer or lender allows you to pause or reduce your mortgage payments for a limited period of time. Forbearance doesn’t erase what you owe – you’ll have to repay any missed or reduced payments in the future.
A common misconception is that when forbearance ends, the homeowner must repay the full amount all at once.
When a homeowner’s hardship has resolved, they have options for repaying the forbearance amount including reinstatement (partial or full) or a repayment plan (the past due amount is spread out over a set time frame and added to their existing mortgage payments) – and coming soon, a payment deferral solution.
Creating a new solution for homeowners
What if the homeowner can’t afford to reinstate the loan or manage a repayment plan after forbearance?
A new Freddie Mac solution called COVID-19 Payment Deferral can help homeowners get back on track for long-term success once they’ve resolved their COVID-19 related hardship. It aims to serve these homeowners with a more affordable workout – between a repayment plan and a modification – to bring them current.
The homeowner can defer delinquent payments (up to 12 months of delinquency) that will be due later (e.g. mortgage payoff, maturity date, refinance, sale of the property, etc.). It’s effective starting July 1 for evaluations for Freddie Mac servicers.
I understand how challenging these times are and I want the industry to know we’re here to help provide stability in the market. As noted earlier, we’re adapting existing solutions and developing new ones for those experiencing a lapse in income or unable to maintain regular mortgage payments.
We’re also providing educational resources so servicers and homeowners have more effective discussions about relief options. These include:
- An expanded loss mitigation tool kit, which can help servicers assist more homeowners in need, especially those impacted by COVID-19.
- A new eBook – COVID-19 Servicing: Guidance for Helping Impacted Homeowners. This is a comprehensive resource covering policy, workout options and training for servicers.
- A Sustaining Homeownership During a Crisis interactive guide for homeowners looking to understand mortgage relief. Available in English and Spanish.
You’ll hear more from us about ways to help homeowners during this crisis, and we’ll continue to evolve and create solutions for today and tomorrow. We invite you to join the #HelpStartsHere conversation.