If you, like many Washington residents, are struggling to pay your mortgage as a result of the economic impacts of the coronavirus pandemic, you have options available. The federal government, Governor Inslee, and the Washington State Department of Financial Institutions (DFI) have all taken steps to help distressed homeowners during the pandemic. If you need financial relief, you will want to consider the options that are currently being offered.
“If You Can Pay Your Mortgage, Pay Your Mortgage.”
To be clear, these options are only being offered to homeowners who are struggling financially during the COVID-19 crisis. As the Washington State DFI says on its website, “If you can pay your mortgage, pay your mortgage.” The Consumer Financial Protection Bureau (CFPB) provides the same advice. If you can afford to pay, not only will not paying your mortgage put additional strain on the banks that are already facing a potential crisis, but it could lead to additional costs and potential foreclosure for you as well.
Mortgage Relief Options Available to Washington Residents during the COVID-19 Crisis
With that said, what if you truly cannot afford to pay your mortgage because you, your spouse, or both of you are currently out of work due to Washington State’s stay-at-home order? Here is an overview of the main options that are currently available:
1. If Your Mortgage Is Backed by the Federal Government
The federal Coronavirus Aid, Relief, and Economic Security (CARES) Act established two protections for homeowners who have mortgages that are backed by the federal government. This includes loans issued by or with guarantees from:
- Fannie Mae or Freddie Mac
- Federal Housing Administration (FHA)
- U.S. Department of Agriculture (USDA)—including USDA Direct and USDA Guaranteed
- U.S. Department of Housing and Urban Development (HUD)
- U.S. Department of Veterans Affairs (VA)
The first protection afforded by the CARES Act is protection against foreclosure. Lenders and loan services are prohibited from foreclosing on federally-backed loans for the 60-day period beginning on March 18, 2020. If you were facing foreclosure prior to March 18, the foreclosure proceedings must be postponed (or “stayed”) during this 60-day period.
The second protection afforded by the CARES Act is a right to request forbearance for up to 180 days if you are experiencing financial hardship due to the coronavirus pandemic. While the stay on foreclosures for federally-backed loans is automatic, you must request forbearance through your loan servicer. If you request forbearance, then you will not have to pay your mortgage during the forbearance period and your loan servicer will not be able to charge additional interest, penalties, or other fees. However, once the forbearance period is over, you will still have to make the payments you otherwise would have made.
In addition to the protections afforded by the CARES Act, further protections are being offered to homeowners who have FHA loans and who have their mortgages serviced with Fannie Mae or Freddie Mac. If you have questions or are not sure what entity backs or services your loan, you can call the Washington State DFI at 1-877-RING-DFI (746-4334) or use the mortgage lookup tools linked on the DFI’s website.
2. If Your Mortgage Is Through a Private Bank and Not Backed by the Government
For homeowners whose loans are not backed by the federal government, the Washington State DFI and the CFPB are currently recommending that they contact their servicers directly in order to find out what relief they are offering. The DFI has issued guidance to mortgage banks in the state, “urging them to work with homeowners adversely impacted by COVID-19, including offering payment forbearance for those who need it.” However, whether and to what extent banks are adhering to this guidance is not yet entirely clear, and different services will almost certainly offer different measures of relief to their customers.
What Happens When You Are Obligated to Start Paying Again?
Another issue that remains unclear is what precisely will happen when the forbearance period, extended under the federal CARES Act, expires. For example, USA Today recently quoted the executive director of the National Housing Law Project as saying, “the problem with the CARES Act is that it doesn’t make clear how borrowers pay back the money during a forbearance period,” and it is reporting that some banks are telling homeowners that they will be required to pay their past-due amounts in a single lump sum at the end of the forbearance period.
Given this concern, when seeking forbearance, homeowners should seek to determine when they will be required to make up for their missed payments after their forbearance periods expire. If the terms of forbearance are unclear, or if you are concerned that you might not be able to pay the full amount you owe when it comes due, you should speak with an attorney to find out what alternatives you may have.
Are There Other Options Available?
In addition to the CARES Act and other relief options that are specific to the coronavirus pandemic, individuals and couples who are struggling to pay their mortgages have other options as well. Homeowners struggling to make their payments is not a new issue, and there are standard relief options that remain available during the COVID-19 crisis.
For example, mortgage rates are currently at historic lows. If you can refinance to a lower mortgage rate, not only might this allow you to make your payments, but it could also substantially reduce the amount you owe over the life of your loan. Working out a loan modification is an option as well, and negotiating a loan modification with the help of an experienced real estate attorney can provide you with much-needed certainty while also protecting you against going further into debt.
Discuss Your Options with a Real Estate Lawyer Today
If you would like more information about the options that are available to you for protecting your home during the coronavirus pandemic, we encourage you to schedule a time to speak with one of our attorneys. To schedule a confidential phone consultation at your convenience, please call us directly or tell us how we can help online today.