As the US mortgage industry strives to determine how best to help COVID-19-impacted homeowners struggling to pay their mortgages, assistance programs and guidance are changing daily. Bookmark this blog to track new developments.
April 14, 2020 — In an effort “to protect both borrowers and themselves,” many mortgage lenders and servicers are raising their lending standards. For example, as reported by HousingWire, JPMorgan Chase is increasing its minimum FICO credit score to 700 on purchase mortgages and its minimum down payment to 20%. The 700 FICO requirement also applies to refinanced mortgages for new Chase mortgage customers. (That said, Chase’s DreaMaker mortgage program will continue to offer reduced-down-payment loans to qualifying low-to-moderate income borrowers.) United Wholesale Mortgage is requiring reverification of a borrower’s employment on the mortgage closing date. Fannie Mae and Freddie Mac are requiring that all income and asset documentation are dated no more than 60 days from the mortgage note date.
April 13, 2020 — While there’s still some confusion regarding the sometimes conflicting COVID-19 credit reporting guidance provided by the Consumer Financial Protection Bureau, the Federal Housing Administration, and the CARES Act, a few things are clear:
- Homeowners who meet the obligations of their forbearance or payment deferral programs will not have their credit scores negatively impacted. The CARES Act instructs servicers and lenders to report these homeowners’ credit obligations as “current.”
- Homeowners can ask servicers and lenders to add a code to their credit reports to indicate they were “affected by a natural or declared disaster.” These disaster codes may make a difference to lenders making underwriting decisions in the future.
- Consumers should monitor their credit reports to ensure that there has been no fraudulent activity. You’re entitled to a free copy of your credit report from each credit bureau (i.e., Experian, TransUnion, and Equifax). Get them here.
- If you’re having trouble paying your bills, be proactive in reaching out to your lender(s). Missed payments will still impact your credit score if you haven’t made accommodations.
April 10, 2020 — Want clarity on whether your loan is owned by either Fannie Mae or Freddie Mac? Want guidance on your options as a homeowner? Fannie Mae and Freddie Mac have resources to help:
- Fannie Mae’s Disaster Response NetworkTM is offering HUD-approved housing counselors to help homeowners with coaching, budgeting, and personalized action plans. Use their Loan Lookup Tool to confirm if your loan is owned by Fannie Mae and — if yes — find contact information or request an appointment.
- MyHome by Freddie MacⓇ provides information and resources for borrowers who’d like to learn more about COVID-19 payment deferral and forbearance options and assistance. Get started by using their Loan Lookup Tool to verify that your loan is owned by Freddie Mac.
April 8, 2020 — Fannie Mae and Freddie Mac have both issued updated guidance to mortgage servicers in several areas (click the links for more details). What are the most important impacts for homeowners?
- The foreclosure moratorium is extended through May 17, 2020. The CARES Act suspension on foreclosure actions includes initiation of any judicial or non-judicial foreclosure process, move for foreclosure judgment, or order of sale.
- Beyond borrower attestation, no documentation of COVID-19-caused financial hardship is required. In accordance with the CARES Act, any borrower who requests a forbearance with attestation of COVID-19-caused financial hardship must be provided with a forbearance plan. No additional documentation other than the borrower’s attestation is required.
- Borrowers must be evaluated for a payment deferral or mortgage loan modification following completion of a COVID-19-caused forbearance plan. Depending on qualifying borrowers’ individual circumstances and hardships, mortgage servicers are directed to use specific loan modification programs. In overview, these programs either (1) modify the loan such that borrowers’ current monthly mortgage payments are increased for a 60-month period to address the escrow shortage, or (2) modify the mortgage loan in accordance with other programs, some of which reduce monthly mortgage payments — and all of which extend the term of the mortgage.
- Mortgage servicers are formally encouraged to provide information to credit reporting agencies. In the past, mortgage servicers have not been required to furnish such reporting. The Consumer Financial Protection Bureau believes that the information will be beneficial to both consumers and overall economic recovery.
April 7, 2020 — NPR is advising COVID-19-impacted homeowners seeking mortgage payment relief that — since guidance, policies, and relief efforts are changing so rapidly — they should be proactive in reaching out to their mortgage servicers to understand their available options. As the article states, “if you tried to get help from your lender and couldn’t, try again a week later. You might get a better answer and be able to extend your loan term to avoid a big balloon payment if you can’t afford that.”
April 3, 2020 — Some mortgage servicers are offering payment deferral program options to borrowers who have a range of mortgage loan types, including some that are not federally backed. For example, as reported by Bloomberg, Bank of America announced that it had “agreed to allow 50,000 mortgage customers to defer payments for three months because they’ve lost income as a result of the pandemic.” As outlined in our guide to forbearance options for homeowners, in order to qualify, homeowners must proactively contact their mortgage servicers to request help.
As Covered has explained in a handful of recent blogs, mortgage forbearance can be an incredibly helpful option for homeowners or landlords experiencing serious financial hardship due to the COVID-19 coronavirus. For some impacted borrowers with mortgage loans backed by Fannie Mae or Freddie Mac, however, a new payment deferral program starting July 1 may offer a forbearance alternative worth considering.
As reported by MarketWatch, to qualify for the newly announced program, borrowers must:
- Have encountered financial hardship that has been resolved. In other words, at the time borrowers apply, they have the financial capacity “to make existing monthly mortgage payments based on their contract and not require a payment reduction unlike a loan modification or forbearance”
- Be between 30 and 60 days delinquent on mortgage payments
- Have originated their mortgage at least 12 months prior to the date of evaluation
- Have NOT received a previous deferral
- Have NOT failed a non-disaster-related loan modification program
Why might coronavirus-impacted homeowners wish to participate in this program, rather than in a traditional forbearance program?
- No increase in monthly mortgage payments or loan term length. In traditional forbearance programs, borrowers are expected to repay deferred or reduced principal and interest payments either a) as part of higher monthly payments following the forbearance period, or b) in a lump-sum payment at the end of the forbearance period. Forbearance programs also extend the borrower’s loan term and payment schedule.
- Delinquent payments deferred until mortgage payoff or home sale. In this new Fannie Mae and Freddie Mac payment deferral program, the borrower’s delinquent principal and interest payments are not due until either “the mortgage maturity date, the pay-off date, or upon the sale of the property, whichever comes first. The term of the loan and payment schedule will remain the same.” In other words, you wouldn’t have to repay the deferred delinquent payments until you either pay off your mortgage or sell your home.
All this to say: If the COVID-19 coronavirus has caused you to miss one or two mortgage payments but your financial situation is likely to recover soon, this new payment deferral program may be a good option. It offers mortgage payment relief in the short term without some of the longer-term implications of mortgage forbearance programs.
Looking for other ways to reduce your monthly mortgage payment?
Bundling, increasing deductibles, or adjusting your coverages or limits may help you find better value for your homeowners insurance premiums, thereby reducing your escrow payments. Let our Digital Insurance Marketplace do the homework, or have one of our expert insurance advisors do a free policy review.