But the federal moratoriums don’t cover more than 40 million renters or 5 million homeowners with mortgage loans not backed by the government. And while the halt to foreclosures and evictions will keep many people in their homes temporarily, a bigger financial shock is brewing as others fall behind on their payments, industry analysts say.
Mortgage servicers, which collect homeowners monthly loan payments, say they have already begun to see an uptick in borrowers seeking help and could quickly become swamped.
“Servicers are laboring under the same constraints as everyone else, telecommuting and practicing social distancing,” said Bob Broeksmit, president of the Mortgage Bankers Association. “This is hitting at a time when their capacity is already constrained because of the pandemic.”
Renters face an even more precarious position. Some states and cities are offering temporary protection from evictions but it’s not universal.
The Renters Alliance in Montgomery County, Md., is already being flooded with queries from nervous renters concerned that they won’t be able to pay their rent soon, said Matt Losak, executive director of the nonprofit advocacy group. About half of renters in the country are “rent burdened,” spending more than 30 percent of their income on rent, he said. “If you’re in that category and one of many workers who has a reduction of hours because of the crisis, you’re going to be pushed over the edge in your ability to pay rent,” he said.
Here’s what you need to know about who is eligible for rent or mortgage relief:
What if I am a homeowner facing foreclosure or eviction?
The U.S. Department of Housing and Urban Development and the Federal Housing Finance Agency, the regulator for Fannie Mae and Freddie Mac, have directed mortgage servicers to halt all new foreclosure actions and suspend those already in progress.
The HUD order applies to single-family homeowners unable to pay their Federal Housing Administration-backed mortgages. There are 8.1 million active FHA loans.
The moratorium also applies to loans backed by Fannie Mae and Freddie Mac, which covers about half of the country’s mortgages or about 28 million borrowers. (The government seized control of Fannie Mae and Freddie Mac in 2008 as the housing market unraveled, and the firms’ losses piled up. The companies, which play a critical part in the housing market, buying mortgages from lenders, then packaging them into securities to sell to investors, remain under federal oversight.)
The moratoriums will last until mid-May, but could be extended, according to regulators.
How do I figure out if my loan is backed by Fannie Mae or Freddie Mac?
Homeowners can look up whether their loans are backed by the mortgage companies through Fannie Mae and Freddie Mac’s websites. Fannie Mae’s online form can be found here and Freddie Mac can be found here.
What if I don’t have an FHA loan or one backed by Fannie Mae and Freddie Mac?
About 5 million homeowners with loans valued at $3.7 trillion are not covered by the HUD or FHFA moratoriums, according to Inside Mortgage Finance, an industry research group. Some states, including California and New York, have paused foreclosure and eviction that would also apply to those borrowers.
But without a blanket moratorium, these homeowners must negotiate arrangements with their mortgage servicer one-by-one.
I haven’t missed a mortgage payment yet but just lost my job. What are my options?
While it can take months or years for someone to lose their home through the foreclosure process, many Americans may soon fall behind as companies shutter their doors to guard against the spread of the coronavirus and lay off workers.
For borrowers with loans backed by Fannie Mae and Freddie Mac, mortgage servicers have been ordered to offer generous forbearance programs allowing borrowers affected by the coronavirus to skip their mortgage payments for as long as a year.
Borrowers must apply for the mortgage relief through their mortgage servicer, which collects monthly payments and will decide how long the assistance will last.
“The government is essentially offering a year-long payment holiday so those who lose their jobs from COVID-19 can stay in their homes without worrying about mortgage payments or foreclosure,” Jaret Seiberg, financial services analyst at Cowen Washington Research Group, said in a research note.
Many people in forbearance programs won’t have to make another mortgage payment until May 2021, Seiberg said.
But, again, the level of relief a homeowner receives will depend on who owns their loan.
California Gov. Gavin Newsom recently announced that the nation’s largest banks, including JPMorgan Chase and Wells Fargo, had agreed to temporarily suspend residential mortgage payments for people affected by the coronavirus in the state for 90 days. But one bank, Bank of America, declined to sign on, saying it would offer mortgage relief on a case-by-base, month-by-month basis instead.
How long will it take to arrange a deal with my mortgage servicer?
Some borrowers may have trouble reaching their servicer quickly as the industry is grappling with same issues as the rest of the country, including employees working from home and practicing social distancing.
Borrowers shouldn’t panic, said Broeksmit, president of the Mortgage Bankers Association. While mortgage payments are typically due the first of the month, borrowers are not likely to be considered late until the 15th, he said. “You have a little bit of time before you need to make arrangement with your servicer,” he said.
A forbearance program can typically be approved within a few days, and unlike during the 2008 housing crisis, borrowers won’t be required to submit tons of paperwork, Broeksmit said.
If given mortgage relief, do I have to repay the payments I skip?
Mortgage servicers are expected to allow millions of borrowers affected by the crisis to skip some mortgage payments. But the money will have to be paid back. Think of it as a loan rather than a gift.
Some borrowers will be told to repay the entire past due amount all at once, while others will be given several months to catch up. But regulators are also encouraging banks to simply extend the length of the borrower’s mortgage rather than forcing them to catch up in a short amount of time.
Repayment arrangements must also be arranged through mortgage servicers.
I’m a renter. Can I be evicted?
The $2 trillion economic rescue legislation passed by Congress last week, prohibits rental evictions for 120-days on properties secured with a government backed mortgage. That covers about half the market for multi-family properties, according to the National Multifamily Housing Council.
Many states and cities have also halted evictions.
The Los Angeles City Council has approved an emergency plan to temporarily halt evictions and create a citywide rental assistance fund. In Oregon, Home Forward, which provides affordable housing, is offering renters affected by the coronavirus outbreak a rental break until at least May 31. The renters will be able to repay their skipped payments over 12 months, according to Home Forward. In Mountain View, Calif., the City Council has approved $500,000 renter assistance program for people affected by the coronavirus.
Is there a federal program to help renters?
There has been a call for national rental assistance program but it has yet to emerge.
Rep. Maxine Waters (D-Calif.), chair of the Financial Services Committee, has proposed spending $100 billion to cover peoples’ rent and utilities. Democratic state Sen. Mike Gianaris of Queens has introduced legislation that would forgive three months of rent and mortgage payments for people and small businesses affected by the coronavirus.
Renters who lost their job or are sick due to the coronavirus should immediately contact their landlord and alert them -- in writing -- of their hardships, said David Dworkin, president of the National Housing Conference. Most landlords will be sympathetic and willing to offer help, said Dworkin. “That communication is incredibly important,” he said.
This story has been updated.