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The coronavirus outbreak has left many Americans dealing with reduced income or unemployment. In response, Fannie Mae and Freddie Mac, along with the Federal Housing Administration and Department of Veterans Affairs, have directed lenders to provide mortgage relief options to affected homeowners.
Some individual lenders and state governments are also taking independent action to provide mortgage relief to homeowners.
If you’re worried about paying your mortgage during the COVID-19 outbreak, a mortgage relief program may be able to help.
Verify your mortgage type
The kind of mortgage you have may determine what type of assistance is available to you.
- The government-sponsored enterprises, or GSEs, Fannie Mae and Freddie Mac deal with conventional loans.
- The Federal Housing Administration insures FHA loans.
- The Department of Veterans Affairs guarantees VA loans.
Each of these entities has issued guidelines for lenders around mortgage relief, including forbearance, loan modification and suspension of foreclosures.
To verify whether you have an FHA or VA loan, find your closing documents (either hard copies or electronic versions) and look for the Closing Disclosure. In the upper right of the first page of this document, under “Loan Information,” you’ll see checkboxes indicating your mortgage type: conventional, FHA or VA. If you can’t locate this document, try looking at your monthly mortgage statement or contacting your lender at the phone number listed on the statement.
Mortgage forbearance programs during the COVID-19 outbreak
The GSEs and government agencies that back certain home loans have announced forbearance plans specific to the coronavirus pandemic. Forbearance lets you make a reduced payment or no payment at all for a set amount of time. Interest accrues, and the skipped amount needs to be paid after the forbearance period ends.
Here are the mortgage forbearance programs available to homeowners affected by COVID-19:
Borrowers are eligible for up to 12 months of forbearance, which will not be reported to credit bureaus. Late fees and penalties for missed payments are waived, although it’s better to work with your lender to set up a forbearance plan than to simply miss a payment.
Find more info on the Freddie Mac website.
Borrowers are eligible for up to 12 months of reduced or suspended mortgage payments. Loans in forbearance won’t incur late fees or be reported to the credit bureaus — so if your mortgage is backed by Fannie Mae, be sure to contact your lender before you miss a payment. After the forbearance period, repayment plans will maintain or reduce monthly payments.
See more on Fannie Mae’s website.
If you have an FHA loan and your ability to pay has been affected by the economic downturn, contact your lender to discuss your options. The FHA always has several mortgage relief programs in place. This includes standard mortgage forbearance lasting up to six months and special forbearance for unemployment (which can last a year or more). Forbearance is typically reported to credit bureaus, though in a statement the FHA encouraged lenders to “consider the impacts of COVID-19 on borrowers’ financial situations.”
Find more info on the HUD website.
The VA has not implemented new policies for the current situation, but has encouraged VA lenders to help borrowers impacted by COVID-19 utilize existing mortgage relief programs. This includes special forbearance, the duration of which can vary based on the homeowner’s situation. The VA has also urged lenders to waive late charges and suspend credit bureau reporting, but this is not currently required.
See mortgage assistance information on the VA website.
Loan modification options related to effects of coronavirus
Freddie Mac is allowing lenders to offer loan modifications typically reserved for homeowners who are victims of natural disasters. Fannie Mae is also allowing for use of disaster relief modifications. Contact your lender to understand your loan modification options. Depending on your employment outlook, a Flex Modification, which is offered by both GSEs, may be another option to consider.
If you have an FHA loan or a VA loan, talk to your lender about loan modification options. Both agencies offer this type of mortgage assistance, but to date, neither has altered its usual programs specifically to assist homeowners impacted by the outbreak.
Contact your lender to get mortgage relief
No matter what type of loan you have, contact your lender directly if you are worried about paying your mortgage. You don’t have to wait until you are delinquent on your mortgage, and calling before you’ve missed a payment will likely give you more mortgage relief options.
Here’s what you should have ready when you call your lender:
- An estimate of your current income (and future income, if you anticipate that it may change).
- An estimate of your current monthly expenses.
- Your most recent mortgage statement.
- Documentation of what caused your situation to change.
Beware of third parties offering mortgage assistance. Look for help from your lender, not from other organizations offering mortgage relief. If you want to get advice about talking to your lender, find a HUD-approved financial counselor on the HUD website. These counselors offer no-cost assistance, and can help you feel better prepared to call your lender.