How do I pay my mortgage during this Pandemic?
Many of our clients have been impacted by the Coronavirus and have reached out to us for some answers. It's a very difficult time for both homeowners who can't pay their mortgage due to a loss of job or cut in hours. It's also very challenging for landlords who provide housing to nearly half of the population in the Portland area because just because rents stop coming in doesn't mean the bills stop as well. I've gone over some details of the impact on the current homeowners and landlords and tried to address several of the questions I've received from clients and friends.
The US Federal Government is the only one who can chime in on the issue of mortgages and foreclosures because the lenders are federally regulated and also federally insured. For this reason, you shouldn't see any local or state conversation on this. However, even the federal government's reach is limited because the banks are privately owned.
The federal government put a moratorium on foreclosures but this does not impact payments due by the property owner. The lender has the ability to continue collecting payments and late fees in accordance with their loan agreement. However, the Feds are putting a lot of pressure on banks to "work with" the mortgagee on the payments. They have also modified the payment guidelines on loans which are Fannie Mae and Freddie Mac backed which represents about 43% of the multifamily market. Click Here to go Directly to FHFA.Gov
Keep in mind that these are forbearance agreements between the parties and NOT required by the government because it's a violation of the US and Oregon State Constitution to interrupt contracts between two private parties. It is NOT debt forgiveness. It is a postponement of the payment for up to 12 months but more commonly 90 days. The payments are then due in the 4th month along with that month's payments. The timelines and repayment plan may vary by lender and the lender may then grant a longer payment plan.
There are also loan modifications available which take the missed monthly payments the property owner skipped and stack it on the back-end of the loan but it's a more complicated process and less common. This is usually done only for those who ABSOLUTELY cannot make the payments but have a great payment history. Most of these programs require applications PRIOR to being 30 days late and will vary on timeline for getting through the process.
There is currently a moratorium on foreclosures as well. However, foreclosures are actually a legal process that doesn't usually begin until a property owner is at least 120 days late on their mortgage. The credit impact on the property owner is the problem for investors and homeowners and there is no moratorium on credit reporting except on those Fannie Mae and Freddie Mac loans currently in a forbearance program. While a tenant may have the 90-120 days to skip rent without late fees or impact on their credit, that does not apply to the property owner or landlord when it comes to their mortgage. IF you are in an active forbearance plan or loan modification and pay as agreed you, most likely, will not have any negative impact on your credit within that timeframe because you are paying as you have realigned the loan agreement. However, it is ALWAYS good to confirm this in writing with the lender directly before beginning any forbearance program or loan modification. Click Here to view Equifax's Policy
I am currently recommending to my clients that they should contact their bank and begin the process of forbearance as soon as they know this may be needed. They should also continue to make mortgage payments as best they can each month until the program is complete or they are current with their mortgage. Try to avoid any 30-day late payments. Keep good notes on any non-payment of rents by tenants and be ready to provide documentation to the lender of such. We are encouraging all of our tenants to communicate with their landlord as soon as possible so they know the tenant is in need of their assistance and asking them to pay everything they can so they can get back on track as soon as possible. A tenant will have the 90-days to avoid payment without late fees or an eviction but only six months thereafter to catch up on rents with a payment plan. That's going to add quite a bit to their budget for quite a long time.
Remain human within this crisis and try to understand both sides of the situation. Tenants do not want the additional stress of not being able to pay rent and having to catch up once the 90-day period is up. Your landlord still has a mortgage, insurance, property taxes, management fees and possibly utilities to pay within the period a tenant isn't paying rent. This situation impacts everyone in our communities and our ability to be understanding and remain compassionate to others shows the character that we as humans, neighbors and a nation possess. God speed!