Coronavirus and Your Home Mortgage
Coronavirus (COVID-19) information guide: Key points relating to home loans, forbearance, mortgages, refinancing, real estate and the housing market.
We hope to help answer and provide resources on the common questions in these challenging times. Whether you’re looking for mortgage payment relief or considering refinancing with current historical low rates to help with cash flow. There are many situations in which you may need mortgage assistance because of the impact of the coronavirus COVID-19. We’ve studied the latest information available to assist you in these unique times.
CARES Act Mortgage Forbearance
Are you experiencing a financial hardship due to the COVID-19 national emergency? Are you having a hard time making your mortgage payments? Forbearance may be the answer for you.
Mortgage forbearance provides temporary relief by allowing you to make lower monthly payments, or no payment at all, for a mutually agreed period of time. It is generally requested by homeowners dealing with an event that impacts their ability to pay their mortgage, like a job loss, natural disaster or major illness.
As of this Update, Homeowners cannot be foreclosed on until Dec. 31, 2020. If you have a federally backed home loan, you can apply for an additional 6 months of forbearance. If your home loan is owned by a private investor or bank, you need to contact them to see if they will honor the CFPB Cares Act.
Mortgage forbearance is not a waiver, you’ll still owe the amount of those missed or less than full payments.
More Explanation is on this video from the Consumer Financial Protection Bureau (cfpb): CARES Act Mortgage Forbearance Video
Mortgage Relief Assistance
Evaluate your reasons for needing Mortgage Relief Assistance.
Are you still able to make your mortgage payment? If not, check with your lender servicer to see if you are eligible for a forbearance. This would pause your mortgage payment and not damage your credit. This program can vary from lender to lender, but basically will buy you time until you are back to work.
You can also see if your lender will add the payments you miss to the end of the mortgage term. Or at the end of the forbearance period, you would pay the missed payments in one lump sum, thus avoiding tacking on to the end of your mortgage term.
Otherwise make your payments as normal if you are financially able.
This applies to government backed loans. Private servicing lenders may have different rules.
So you need to check what type of loan do I have?
Forbearance simply is an assistance program for homeowners that pauses your mortgage payment. When you are at the end of your forbearance plan, you’ll need to pay the past-due amount, apply for other programs your lender may offer, or see if you can extend the forbearance period. This will not have a negative effect on your credit.
Is this an option to consider? With historically low interest rates it could be an ideal time to obtain a lower mortgage rate or shorten your mortgage term (or both). Some may see this as a perfect time to get some “cash-out” from your home’s equity to build a cash cushion.
Lenders will be aggressive in obtaining your business during these times more than ever. The downside may be the extra time it may take to process your refinance application. And the underwriting process and guidelines will be different now vs. as in the past. We will address this in more detail in the below Underwriting, Appraisals & Closings sections.
Yes times are different to be applying for a home loan, but that is the lenders mission to overcome, not yours. You could benefit in these times possibly like never before. Our refinance guide will help you prepare or view various options. We also have several articles on mortgage programs. Please see mortgage financing options for a library of articles and calculators that will help you along the way.
Locking in the Mortgage Rate
Locking in an interest rate is important and will help give you the peace of mind that your mortgage payment will be what you are budgeting for. Each lender has its own policy regarding lock-in options. And keep in mind during these times processing could take longer than normal.
This is very important when selecting a lender, so you fully understand your options and what their policies are. Lock periods can be anywhere from 15 days to 9 months (long term locks are usually for new construction). They do not come cheap either. The length you need for a lock will impact the costs related to that specific lock period. Most mortgage rate quotes assume a 30 to 45 day lock period.
Uncharted waters impacts current underwriting, appraisals and closings.
Underwriting will have its challenges like just about everything else these days. Verification of employment (VOE) is more challenging with so many companies having limited staff. Underwriters need to verify if the applicant is employed or laid off. Lenders are developing new ways to satisfy this requirement. When selecting a lender, ask what their methods are currently so you know if you can help assist the underwriter or processor in verifying your employment.
Possibly debt loads have changed with delayed payments you may have in place. Be sure and provide any agreements you may have with debtors.
Assets most likely have changed as well with your non-liquid investments. This can impact your financial profile.
In person in house appraisals are being explored and new rules are being implemented for the safest method possible. Some lenders are allowing drive by outside appraisals to reduce the risk of the virus spreading. Some are doing so called Desk Top appraisals using data that exist online for your property. What Is The Difference Between Desktop Appraisals And Full Appraisals?
There is scrutiny on appraisers who need to enter your home. Are they virus safe? Have they been in contact with infected persons? Obviously we are still in a period where we do not know who has the virus or has been in contact with the virus.
Ask your lender how they plan on doing appraisals.
Closings in Person or Online?
Settlement or closing happens when all conditions of your approval have been satisfied and cleared by your lender’s underwriter. Lenders along with the title company will have new guidelines in place on in-person closings vs. online closings. Everyone wants to be as safe as possible during this COVID-19 situation, so ask what the lenders current set up is for closings.
Your biggest questions are most likely how much cash do I need to bring to the closing (certified checks payable to yourself are required)? Or how much cash will you be receiving back if it is a cash-out refinance.
The important closing papers include the closing disclosure (CD). Request this at least a few days prior to closing. This will be the actual monies you are agreeing to pay (or receive). Review these numbers (with a real estate attorney if possible), to make sure everything is in line for what you signed up for. Ask your loan officer to explain any questions you may have after reviewing the CD.
You will need to have your proof of homeowners insurance prior to the closing. Each lender will have specific requirements for what your homeowner insurance agent needs to provide.
You will be notified of any questions or conditions that are required for a clean mortgage approval. This will need to happen before you can close on your refinance. Not all lenders have great processors, so you should stay in touch with your loan officer to make sure nothing is pending that you can assist with. Be proactive!
→ How some of the mortgage closing documents have changed over the years
→ Find a good mortgage loan officer
Lender Servicers: Fannie, Freddie, FHA, VA, USDA & Private
- Who owns your mortgage?
- It a government backed loan or with a private lender?
- Why does it matter?
Homeowners are sometimes not aware of who owns their mortgage. Loans get sold all the time and one servicer can differ from another on how they handle tough times like these. Internal procedures on helping homeowners with programs to help them not be in default, delaying payments (forbearance), or adding past due payments to the end of the loan. Most lenders now have the tools with the stimulus bill to help you get through this difficult time.
- Contact your lender asap if you will have problems paying your mortgage payment.
- Check this page for help by the Consumer Financial Protection Bureau (CFPB): Who owns my mortgage?
If you have an FHA, VA or USDA loan then you already know who owns your loan. These are government backed loans just like Fannie and Freddie loans. If a private lender/investor owns your loan then you are subject to their in house guidelines and rules. But the stimulus package also offers private lenders relief tools as well in helping its customers.
Call your mortgage servicer. You can find the number for your mortgage servicer on your monthly mortgage statement or coupon book.
So it matters who owns your mortgage because government backed loans and private lender owners have a different set of rules to go by. Jumbo mortgages will most likely be non-government owned.
Below are a few government site links for more information:
Real Estate Housing Market
Home values surely are being affected with the COVID-19 situation, and impacting home buyers and home sellers who are considering a new move. And homeowners are not sure how their homes value is being adjusted.
Spring is typically a popular time of year to buy or sell a home. Now though many are hesitant to move forward until they know more information where this COVID-19 virus is heading. Of course this is impacting the housing market. Many agencies are working on ways to help the housing industry by the stimulus package(s) and finding ways to save jobs. Federal and local governments are working together during these new times.
The National Association of Realtors (NAR) has some good information relating to the current housing market: https://www.nar.realtor/coronavirus
Check rates from home loan lenders: Home loan lender rates