This is just a quick follow up on the mortgage relief post I wrote on April 4th. Yesterday, I read an NPR article about issues with mortgage relief . It featured a couple from Maui. Like many island residents, the couple is experiencing a massive loss of income due to the impact on COVID-19. They are one of the many homeowners pursuing mortgage relief that are finding the terms offered by their lenders to be onerous.

In the case of the Maui couple, their loan is through Freedom Mortgage. While the lender offered to defer their loan payments for three months, Freedom Mortgage required a balloon payment at the end of that period. Even under the most optimistic scenarios, it seems unlikely that the borrowers would be able to come up with that balloon payment.

The Consumer Finance Protection Bureau website indicates that federally backed mortgages should be able request forbearance for up to six months. The CARES Act creates mechanisms to move deferred payments to to the end of the mortgage. Freedom Mortgage originally claimed that the balloon payment was the only option they could offer for deferred payments. They claimed they could not defer the amount of the forbearance to the end of the loan. NPR brought this to the attention of federal regulators. On a subsequent follow up, Freedom Mortgage changed its tune with NPR. The Maui Couple is still trying to get clarification on their options.

Takeways

To be clear, not all borrowers are running into the roadblocks encountered by this Maui couple. A number of lenders are making adjustments that allow for six month deferments with deferred payments at the end of the mortgage. That said, borrowers should expect prolonged long wait times and filing an application to get the forbearance. Forbearance terms can also vary depending on your loan program.

The biggest takeaway is that borrowers should be cautious if they are seeking mortgage relief. Make sure you read the terms of any relief offer closely. Reach out to a housing councilor (800) 569-4287 if the terms offered by your lender are confusing or not financially feasible.

Maui depends on tourism for a significant part of its economy. Covid-19 and the ensuing shut down means a big loss of income for a number of Maui homeowners. If you are a Maui resident unable to pay your mortgage, there may be some mortgage relief options for you based on the CARES act.

Eligibility

To be eligible, your mortgage needs to be federally owned or backed by a federal agency. Relevant federal agencies include:

• HUD
• USDA
• FHA
• VA
• Fannie Mae
• Freddie Mac

It’s pretty clear when your loan is HUD, USDA, FHA or VA. Fannie and Freddie back over 50% of the nation’s mortgages, but not all homeowners know or remember who backs their loan. You can check to see if your loan is backed by Fannie or if it is backed by Freddie.

Forbearance

If you are unable to pay your mortgage due to financial difficulties related to Covid-19, you can contact your mortgage servicer to request forbearance for 180 days. Forbearance allows you to pause or reduce your mortgage for that 180 day period. To be clear, this does not reduce the principal on your loan. You would still need to pay off the missed payments or the difference on the reduced payment in the future. You may apply for an additional 180 day forbearance if your financial situation does not improve by the end of the first 180 days. Your forebearance options may depend in part on your loan program. If you are concerned by impacts on your credit score, servicers must not report to the credit agencies a Borrower who is on an active forbearance, repayment, or trial period plan due to COVID-19 related hardship.

Foreclosure

If you are facing foreclosure due to existing loan challenges, your loan servicer or lender may not foreclose on you for 60 days after March 18th. The CARES Act forbids beginning either judicial or non-judicial foreclosure proceedings. The Act also prohibits finalizing a foreclosure judgement or sale during this period.

Still Confused or Need Help?

The Consumer Finance Protection Board offers a guide to Coronavirus mortgage relief options that gives advice and provides a lot more detail. They provide important suggestions like questions to ask your mortgage servicer. You may also find your nearest housing councilor by calling by calling (800) 569-4287. If you don’t have a federally backed mortgage and you are not able to pay your mortgage, you should still contact your mortgage servicer to see what options they may have available to you. Last, but not least be wary of scams. Unscrupulous Sleazeballs will try to take advantage of the current situation. Lean heavily on the advice of the CFPB.