Here’s what to do if you can’t pay your mortgage

Janna Herron and Dhara SinghApril 2, 2020, 4:06 PM CDT

As many Americans face joblessness or reduced hours due to measures to stem the coronavirus outbreak, some may be wondering how they will meet their mortgage payment this month and longer.

Fortunately, many banks and lenders have been preparing for the possibility that borrowers will need extra help and have created hardship programs to address the need.

Fannie Mae and Freddie Mac, the government-sponsored enterprises that guarantee millions of mortgages, also told loan servicers that they could suspend payments for up to 12 months for homeowners experiencing a loss of income due to the outbreak of COVID-19.

But getting a break from your mortgage payment requires communication and action on your part, said Bruce McClary, spokesman for the National Foundation of Credit Counseling, a nonprofit.

“If you just stop paying, it’s not going to work,” McClary said. “Don’t assume that will automatically qualify you if you stop paying.”

Here’s what to do.

Homeowners have different options available to them if they experience a financial hardship from the coronavirus and can't pay their mortgage payment. (Photo: Getty Creative)
Homeowners have different options available to them if they experience a financial hardship from the coronavirus and can’t pay their mortgage payment. (Photo: Getty Creative)

Call your lender

Your lender doesn’t know what you’re facing unless you tell them. While it’s a hard call to make, you won’t be the only needing help.

“If you are facing financial hardship due to an interruption in your income, let your mortgage provider know as soon as possible so that you can understand what your options are,” said Glenn Brunker, a mortgage executive for Ally Home.

Gather documentation

You may need to provide some documentation that shows you’re no longer employed. “Most people receive official notices,” from their employer, McClary said. Lenders may ask for the name and contact information for your employer to verify themselves.

Still, it may be harder for gig workers and freelancers to get that specific information, but your lender should work with you on what will suffice, McClary said.

“Be prepared to have some record of your situation that you’re not working,” he said. “Be ready to provide that.”

Also have your account number handy, according to the Consumer Financial Protection Bureau. Be prepared to offer the following:

  • Why you can’t make your payment
  • Whether the hardship is permanent or temporary
  • Your income, expenses, and assets
If you can't pay your mortgage because of a coronavirus-related hardship, you have options to get you through. (Photo: Getty Creative)
If you can’t pay your mortgage because of a coronavirus-related hardship, you have options to get you through. (Photo: Getty Creative)

Get the details

Make sure you understand the ins and outs of a hardship plan and get those detail in writing.

  • Will interest continue to accrue while the payments are deferred?
  • Will you be charged any penalties or late payment fees?
  • How will the lender report these deferred payments to the credit reporting bureaus?
  • Will you owe all missed payments at one time or will additional payments be tacked onto the mortgage?

Knowing the answers to these questions will protect you and your finances down the road when you get back on your feet.

Know the new rules

Fannie Mae and Freddie Mac

If you have a mortgage backed by Fannie Mae and Freddie Mac, there are guidelines that mortgage lenders and their loan servicers must follow.

“For federally-backed mortgage relief, additional documentation is not required to qualify beyond your request to have a COVID-19 related financial hardship,” McClary said.

Any forbearance program on Fannie or Freddie home loans can’t accrue late fees and the program can last up to 12 months. There’s no negative credit reporting during the forbearance period. These programs can suspend payments altogether or lower the required monthly payment. Any foreclosure or other legal proceeding will be suspended.

You can find out if your mortgage is backed by Fannie Mae or Freddie Mac here and here.

Other federally backed mortgages

Under the recently passed CARES Act, you can request a 180-day forbearance program followed by an extension of another 180 days if you experience a coronavirus-related hardship and your mortgage is guaranteed by the following federal entities:

  • U.S. Department of Housing and Urban Development (HUD)
  • U.S. Department of Agriculture
  • Federal Housing Administration (FHA)
  • U.S. Department of Veterans Affairs (VA)

There are no additional fees, penalties or extra interest added to your account.

Other mortgages

If your mortgage isn’t backed by the government, ask your servicer what options you have to address your circumstances. The CFPB and other regulatory bodies are encouraging lenders to work with struggling borrowers.

Get help

If it’s too daunting or emotionally draining to contact your lender yourself, you can turn to a HUD-approved housing counselor to help walk you through the process. You can find a counselor near you through the National Foundation for Credit Counseling or through the Housing and Urban Development Department.

Published by lmgllc6

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