Due to the global Novel Coronavirus (COVID-19) outbreak, homeowners are now faced with unforeseen difficulties as a result of the unexpected economic turndown. Many are at risk of defaulting on their mortgage payments, or worse, foreclosure. However, some relief is available.
On the state level, California Governor Gavin Newsom signed an executive order which issued a moratorium on all foreclosure and eviction proceedings through at least May 31, 2020, which is to be implemented by local governments.
California also reached an agreement with several banks, including JP Morgan Chase, U.S. Bank, Wells Fargo, Citigroup, as well as approximately 200 state-chartered banks, mortgage lenders and servicers as well as credit unions to provide relief for California consumers and homeowners. Through this agreement, these institutions will offer a forbearance on homeowners’ mortgage payments for up to 90 days if they are impacted by COVID-19. They may also extend the 90-day period if the homeowner shows continued hardship. During this period, borrowers should not be charged late fees and their credit score should not be negatively impacted due to the forbearance. Additional information, including the list of participating institutions, can be found on the California’s Department of Business Oversight website: https://dbo.ca.gov/2020/03/25/covid19/
The historic $2.3 trillion-dollar Coronavirus Stimulus package also offers relief. Under the stimulus package, mortgage companies servicing federally backed mortgages (i.e. Freddie Mac and Fannie Mae) must offer a 12-month forbearance for those borrowers impacted by the Coronavirus pandemic, which will temporarily suspend a homeowner’s mortgage payments. In addition, the mortgage servicer cannot initiate foreclosure or evictions for 60 days, beginning March 18. Borrowers who own multifamily properties can seek a 90-day forbearance, during which time tenants cannot be evicted for nonpayment.
In addition to these terms, loan servicers servicing Freddie Mac and Fannie Mae backed loans must waive penalties and late fees during the forbearance period; suspend reporting mortgage payment delinquencies relating to forbearance; and offer loan modification options that may lower payments or keep the same payment amount after the forbearance period ends.
What steps should you consider taking in light of these programs?
1. Contact Your Mortgage Servicer/Lender: You cannot merely stop making your mortgage payments. Take initiative and contact your lender if you think you cannot make your next mortgage payment. Communication with your lender or mortgage servicer is critical to determine if there is a loan workout program available for your loan. You will likely be in a better position if you contact your servicer before the initiation of foreclosure proceedings instead of after you defaulted on your mortgage. Depending on your lender, there may be various programs available to you, including a forbearance plan, which will temporarily suspend or reduce your mortgage payment.
2. Create A Budget: Just because you enter into a forbearance or repayment plan, does not mean your debt is forgiven. Create a budget to repay the amount that has been forborne, reduced or suspended. You will need to repay this amount and each lender may have different terms with respect to that repayment (i.e. lump sum or repayment plan where smaller amounts are tacked on to your regular monthly payment). Remember, these programs are not a forgiveness of debt or free money.
3. Protect Your Credit Score and Stay on Top of Your Credit Report: Should you enter into a forbearance, repayment or other type of plan with your lender, it is important to understand the consequences such an arrangement may have, if any, on your credit report. For instance, with a Freddie Mac, Fannie Mae or FHA backed loan, a homeowner with a forbearance plan should not have past-due payments reported to the credit bureaus during the forbearance period in light of the COVID-19 crisis. You should raise this issue with your loan servicer and confirm that your credit score is not negatively impacted in the event you enter into a forbearance or other type of plan. You can request a free copy of your credit report every 12 months from each of the three credit bureaus – Equifax, Experian and TransUnion. Visit www.annualcreditreport.com to retrieve your report.
4. Consider Filing for Unemployment Benefits: Consider filing for unemployment through California’s unemployment department to determine if you are eligible for such benefits. Consult an employment attorney if you need more information about your unemployment rights and benefits.
5. Protect Your Legal Rights: If you have fallen behind on your payments and contacting your mortgage servicer for options has been unsuccessful, contact Bezdik Kassab Law Group for a no-cost consultation to better understand your legal rights. The attorneys at Bezdik Kassab have litigated and/or managed thousands of cases relating to wrongful foreclosure due to loan servicing and other errors and can assist you with formulating a strategy to ensure that your legal rights are protected and to help you keep your home.
“5 Things Considered” is Bezdik Kassab Law Group’s regular publication of legal material and analysis to assist the reader in considering various legal issue and topics. For additional information, please contact Bezdik Kassab Law Group for a no-cost consultation.
Bezdik Kassab Law Group is a boutique law firm specializing in Consumer & Mortgage Litigation as well as Business Litigation & Transactions (BLT). To learn more about the Bezdik Kassab difference, visit the firm’s website www.Bezdkkassab.com and social media pages on Bezdik Kassab’s LinkedIn; Facebook; and Instagram.
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