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Coping with the COVID-19 Crisis: What to Do If You Can’t Pay Your Mortgage or Rent

You’ve read the headlines – the unprecedented COVID-19 crisis is here and it’s sending economic shockwaves across the country. But when it comes to the current economic state, unprecedented is just a mere understatement.

As jobs and paychecks are quickly diminishing, millions of households across the US are facing financial burdens in the wake of the novel coronavirus (COVID-19) pandemic. With this growing environment of uncertainty, everyday more and more Americans are faced with the looming question, “How am I going to make my mortgage/rent payment?”

If you’re asking yourself this question, you’re not alone. With nearly 40% of Americans reporting they’d need to borrow money to cover a $1,000 emergency expense1, it’s easy to imagine how many will soon face struggles making these payments.

So what should you do if you can’t make your next mortgage or rent payment?

Don’t Panic…Help is On the Way

Amidst shelter-in-place mandates in cities throughout the country, making mortgage and rent payments has become a national issue, as both the federal and local governments are working to develop solutions designed to aid people through the current crisis. As such, we’re hearing of more strategies to address these rising challenges day by day. Some of the measures include short and long-term forbearance options, modifications to mortgages, and payment relief options – all based on individual borrower circumstances.

So far, the US Department of Housing and Urban Development (HUD) has authorized the Federal Housing Administration (FHA) to implement an immediate 60-day foreclosure and eviction moratorium for single-family homeowners with FHA-insured mortgages. To stay up to date on the latest measures being taken, visit www.hud.gov.

Similar actions were implemented by the Federal Housing Finance Agency (FHFA), who recently instructed Fannie Mae and Freddie Mac, the nation’s leading mortgage clearinghouses, to suspend all foreclosures and evictions for 60-days as well. Additionally, these two Enterprises have ordered loan providers to offer assistance by extending mortgage forbearance for up to one year. It’s important to note that while forbearance is a great option for those facing financial hardship, it isn’t always forgiven – deferred payments will likely still need to be made in the future.

And while these changes are only currently applicable to Fannie Mae & Freddie Mac loans (about half of total US loans), most other mortgage lenders are expected to follow suit by opting for similar policies. Again, with these changes coming day-by-day, be sure to visit the agency’s website, www.fhfa.gov for the latest and check in with your mortgage lender.

So if you’re facing financial hardship and are unable to make your payment, there are programs in place to help. But in order to access and take advantage of these programs, there are steps that first need to be taken.

For Homeowners

Contact your lender
While many lenders have implemented special waivers and payment deferral programs due to the COVID-19 pandemic, you can’t just stop paying your mortgage.

If you’re currently facing difficulty in making mortgage payments (or think you will), you’ll first need to contact your servicer – the company you make payments to – to discuss payment options and plans for going forward. And with lenders likely to face an influx of requests for help in the weeks and months ahead, you’ll want to be as proactive as possible in staying in touch with them. You don’t want to wait until you start missing payments, so the sooner you can start the relief process, the better financially prepared you’ll be.

Reach out to your bank or credit union
Some banks and credit unions are also offering programs for those facing financial hardship due to the COVID-19 outbreak. Contact your bank or credit union to see what programs they may have in place and if you may be eligible to tap into them.

For Renters

Get in touch with your landlord
If you’re facing financial stress and struggling to make rent payments, you’ll need to reach out to your landlord well in advance of your next payment due date. The reality is that most landlords will be understanding and willing to make accommodations for a good tenant who is dealing with financial hardship due to current events. By opening lines of communication with your landlords as soon as possible, you’ll be able to work together on a payment plan and agreement that is favorable to both parties, given the current economic state.

Evaluate all other assistance options
In the event your landlord is unable to grant you a payment plan, other options may be available. For instance, you can work with your bank to take out a short-term loan to fund your housing expenses over the upcoming months. Furthermore, major cities are instituting eviction moratoriums for those struggling to make rent amid the COVID-19 pandemic. So far, New York, Los Angeles, and Seattle have instituted these measures, with a growing list of additional cities expected to follow. To see if your city has taken these measures, visit your local government website.

Eliminate Your Monthly Mortgage Payment with a Reverse Mortgage
If you’re struggling to make your monthly mortgage payments – there is another solution available. Available to homeowners age 62 and older, a Home Equity Conversion Mortgage – also known as a reverse mortgage – allows you to eliminate your existing monthly mortgage payment.

How Does it Work?
A reverse mortgage lets homeowners age 62 or older tap into a portion of the equity in their home to use as they wish. If there is an existing mortgage on the home, the money from the reverse mortgage is first used to pay off that loan – and since no monthly mortgage payments are required, you can eliminate that monthly expense and keep more cash to use as you see fit – especially in today’s volatile economy.

Unlike the stock market, where you can’t lock in stock values from the past, home values today haven’t fallen much, if at all. And despite today’s down market, there is some good news – today’s interest rates have fallen to record lows, resulting in maximum loan proceeds.

More than a half million Americans have already made a reverse mortgage part of their financial plan2 – isn’t it time you do the same? To learn more about tapping into home equity to eliminate your monthly mortgage payment, contact the Longbridge team today.

1 https://www.bankrate.com/banking/savings/financial-security-january-2020/

2 Source: 2010 NRMLA study.

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