Is my house at risk if I have no income due to coronavirus?
With economic activity at a dead halt due to COVID-19, California homeowners worry about next month’s mortgage payment. And the month after that, for as far as the pandemic can see.
While it’s early days, and I fully expect broad governmental measures to protect homeownership, here’s what we know at present.
Federal protections from foreclosure
HUD has imposed a 60 day suspension of foreclosures and evictions on loans from the FHA. Loans backed by Fannie Mae and Freddie Mac will also get a 60 day reprieve, with promises of further extensions if the circumstances require.
So, how do you know if Fannie or Freddie owns or guarantees your home loan. There’s a tool, or rather two tools, for that.
Look up your loan.
Thus, California homeowners with existing foreclosure or eviction actions are protected for at least two months. I fully expect that period will be extended.
Dealing with missed payments
What if you were current when the shut-down was imposed but you can’t make next month’s payment?
If your loan is owned or guaranteed by Fannie or Freddie, servicers have been directed to offer flexible payments or a suspension of all payments for up to a year.I anticipate federal regulations that will require servicers to offer loan modifications or payment extensions. We can hope that the system has more teeth than the HAMP modifications following the Great Recession.
Not Fannie or Freddie?
It’s less clear, at this point, how lenders with loans that aren’t federally insured will proceed.
Early data suggests that lenders are prepared to be flexible. We’ll have to wait to see if the federal government requires it some time down the road.
Check on line for the latest from your lender/servicer.
California 90 day grace period
Governor Newsom has reached agreement with 4 of the top five federally chartered banks who own or service home loans. (Bank of America is the hold out.)
Two hundred state chartered banks and credit unions have joined the agreement
The banks agreed to waive mortgage payments for 3 month regardless of income level. No fees or penalties will accrue, and there will be no negative credit reporting.
Borrowers do have to document that their inability to make payments was traceable to the coronavirus. Details on what kind of documentation is required varies among lenders.
For Californians, the most reassuring news is that California foreclosures take a long time. While California foreclosures don’t involve the courts, the notice and cure periods mandate 4-6 months between the start of foreclosure and an actual foreclosure sale.
And the people who conduct foreclosure sales are in lock-down, too.
Write and call
For every debt that you can’t pay because of the shelter in place order, call the creditor to tell them how you are affected. That’s what the creditors all say.
I say, follow up that call with a short letter repeating the facts of your situation. Doesn’t have to be long or fancy. Just get paper in the creditor’s hands.
Keep a copy for yourself. Don’t count on the creditor to be able to file your letter and find it later.
Then you’ve made a record of your call and your situation.
Looking forward
I fully expect that we will see muscular, nationwide programs to keep people in their homes. As a society, and an economy, no one benefits if masses of families lose their homes.
It will take time to work out just what those programs look like and how well they work.
But work it out we will.
Updated 3/30/2020
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