I will update this post as new information is made available, but we’re starting to see mortgage relief packages rolled out by all the major housing agencies.
Whether the government launches some sort of HAMP-esque program that goes beyond the usual loss mitigation options remains to be seen.
That may be dictated by how bad the coronavirus outbreak gets, and its eventual effect on the housing market.
Coronavirus Relief for FHA Loans
The Department of Housing and Urban Development (HUD), which oversees the FHA home loan program, has halted foreclosures and evictions for the next 60 days as a result of COVID-19.
This applies to the initiation of a foreclosure and the completion of any foreclosures in process.
Additionally, lenders must cease all evictions of individuals living in an FHA-insured single-family property.
This guidance applies to both forward FHA loans and reverse mortgages, known as Home Equity Conversion Mortgages (HECM).
With regard to mortgage payment relief, the FHA has called on loan servicers to offer its suite of loss mitigation options, including short and long-term forbearance options, along with mortgage loan modifications.
Coronavirus Relief for VA Loans
The VA has released a circular titled, “Foreclosure Moratorium for Borrowers Affected by COVID19,” which strongly encourages a 60-day halt on foreclosures and evictions beginning March 18th, 2020.
They have also encouraged holders of VA guaranteed home loans to extend forbearance to borrowers affected by COVID-19.
Loan servicers have been to told to evaluate the VA Loss Mitigation options outlined in Chapter 5 of the VA Servicer Handbook M26-4.
This may include the reapplication of prepayments to cure or prevent a loan default, and allows the terms of any guaranteed loan to be modified without the prior approval of the VA, assuming conditions in the regulation are met.
USDA Rural Development Response
First off, USDA Rural Development will continue to provide USDA home loans and grants to those in rural communities nationwide.
Additionally, they have granted authority to lenders that participate in their Single-Family Housing Guaranteed program to work with borrowers having difficulty making payments.
Lastly, RD will issue guidance to its Single-Family Housing Direct borrowers to ensure those in need of payment assistance are adequately reached.
Fannie Mae and Freddie Mac Assistance Options
The pair, which back the vast majority of home loans, have both suspended foreclosure sales and evictions for the next 60 days.
Both Fannie Mae and Freddie Mac will provide payment forbearance for up to 12 months.
Fannie Mae says it will either reduce or suspend borrower’s mortgage payments during that time.
Neither will assess penalties or late fees against borrowers.
Freddie Mac says forbearance is an option regardless of occupancy, meaning primary residences, second homes, and investment properties are all eligible for relief.
Additionally, both are suspending the reporting of delinquencies related to any forbearance, repayment, or trial plans to the credit bureaus.
So homeowners won’t have to worry about getting dinged by the credit bureaus as they seek assistance.
Boston Mortgage Relief
The Mayor of Boston, Marty Walsh, has inked a deal with 12 banks and mortgage lenders that allows homeowners to defer mortgage payments for at least three months.
The institutions in question include Bank of America, Boston Private, Cambridge Trust Company, Century Bank, Citizens Bank, City of Boston Credit Union, Dedham Savings Bank, Eastern Bank, Mortgage Network, Inc., PrimeLending, Salem Five Bank, and Santander Bank.
The participating lenders will extend loan deferment if needed, and have also agreed to a collective goal of approving deferments within 21 days of application.
Only “essential paperwork” is needed from the borrower, and it will not be reported to the credit bureaus as being a late, nor will they will charge late fees.
Most importantly, once the deferment period comes to an end, the homeowner will not be required to pay the total deferment/forbearance amount in a lump sum.
Connecticut COVID-19 Mortgage Assistance
Connecticut Governor Ned Lamont has announced that his administration has reached an agreement with 50+ credit unions and banks to offer mortgage relief to homeowners affected by the COVID-19 pandemic.
Like other states, there will be a 90-day grace period on mortgage payments and no foreclosures/evictions for 60 days.
Additionally, homeowners will get relief from any fees and charges for 90 days, and won’t suffer any negative credit score impact.
Nevada Mortgage Relief Measures
- Moratorium on evictions and foreclosures for duration of the State of Emergency
- 90-day grace period on mortgage payments
- Banks have agreed to work directly with customers to ensure no one pays a giant lump sum payment to get back on track
Governor Sisolak and State Treasurer Zach Conine have announced relief options for homeowners in the state of Nevada.
They say “a vast majority of lending institutions are offering homeowners facing financial hardships due to COVID-19.”
This includes a a 90-day grace period on mortgage payments, and more importantly, have agreed to “ensure that no one is hit with a giant lump sum payment if they need to stop making payments for a couple of months.”
“In many cases, these payments can instead be added onto the back end of a loan, so people can get back to work and get back on their feet.”
New Jersey Mortgage Grace Period
New Jersey Governor Phil Murphy announced mortgage payment forbearance of up to 90 days for borrowers economically impacted by COVID-19.
- 90-day grace period for mortgage payments
- No negative credit impact for receiving assistance
- No mortgage-related fees or charges for at least 90 days
- Moratorium on foreclosure sales and evictions for at least 60 days
New York State Mortgage Assistance
In New York State, Governor Cuomo signed an executive order that provides mortgage relief, including a 90-day payment holiday to homeowners impacted by the novel coronavirus.
Here are the details:
- Postpones or suspends any foreclosures
- Waives mortgage payments for 90-days based on financial hardship
- No negative reporting (late payments) to credit bureaus
- Grace period for loan modifications
- No late payment fees or online payment fees
Apparently, any missed monthly mortgage payments are being tacked on to the back of the loan. It’s unclear if this will effectively freeze the mortgage or result in a balloon payment.
Last week, Italy’s deputy economy minister announced that mortgage payments would be suspended across the entire country in light of the coronavirus (COVID-19) outbreak.
While plenty of Italian homeowners might not actually contract the virus, the economic implications of a countrywide shutdown could affect their ability to make timely housing payments.
For example, with Italy effectively coming to a standstill, many homeowners may not be able to work until the lockdown is lifted.
It’s unclear who will be paid during this time. There are also longer-term layoffs to consider if businesses are permanently affected.
In the UK, similar measures are already being extended by individual banks, including TSB Bank, which is offering a “repayment holiday for up to two months.”
My understanding is this gives homeowners a two-month break before they must resume making timely monthly mortgage payments.
Similar moratoriums are being offered to mortgage borrowers by other British banks, and they’re also making it easier for customers to get access to their cash if need be.
U.S. Mortgage Lenders May Not Be Far Behind
- Italian banks have already suspended mortgage payments nationwide
- UK banks are now offering mortgage holidays to affected customers
- Matter of time before U.S. banks and lenders extend similar assistance
- If you need help paying your mortgage, contact your loan servicer and look out for news bulletins
While no major coronavirus restrictions have made it to the United States just yet, at least beyond some universities and other private institutions, there’s a chance we could experience a similar clampdown soon.
Really, it sounds more like a matter of when than if, despite no mandatory freedom of movement likely.
This is known as “social distancing,” designed to limit human-to-human contact and stop the spread of the fast-moving COVID-19.
Assuming that happens, there’s a good chance mortgage lenders will step in and offer temporarily relief for those affected.
Again, while the virus itself may not directly affect an individual homeowner’s health, disruptions in multiple industries could lead to layoffs or the inability to perform job duties.
Generally, when a natural disaster occurs, Fannie Mae, Freddie Mac, and HUD offer some level of assistance and/or guidance to loan servicers to ensure borrowers can get back on their feet, or avoid falling behind to begin with.
This may involve the suspension or reduction of mortgage payments for 90 days up to six months, depending on the circumstances.
They may also suspend eviction lock-outs on real estate owned (REO) inventory to avoid displacing tenants during what could be a sensitive time.
Tip: If you need assistance paying your mortgage at this time, be sure to keep an eye on the FHFA or HUD websites, along with Fannie Mae and Freddie Mac’s, for any pertinent announcements.
Homeowners Are Helping Themselves to Lower Mortgage Rates
- Record low interest rates lead to 55.4% increase in weekly mortgage applications, per MBA
- Refinance share surged to 76.5% of total loan volume from 66.2% a week earlier
- 2020 mortgage origination forecast revised up to $2.61 trillion
- Industry group now expects refis to account for $1.23 trillion in volume, up 36.7% from earlier estimates
In the meantime, homeowners seem to be helping themselves by taking advantage of the record low mortgage rates also on offer at the moment.
Instead of asking for a payment holiday, borrowers are lowering their mortgage rates in droves via a traditional mortgage refinance.
This morning, the MBA reported that home loan applications surged 55.4% from a week earlier as refis jumped 79% to their highest level since April 2009.
Home purchase applications also rose six percent from a week earlier, a good sign in an otherwise uncertain time.
That pushed the refinance share of mortgage activity to 76.5% of total applications from 66.2% a week earlier.
The record low interest rate environment prompted the MBA to revise its origination forecast, forecasting total mortgage volume of $2.61 trillion this year, a 20.3% increase from 2019’s volume ($2.17 trillion).
Additionally, they expect home refinance originations to double their earlier projections, surging 36.7% to around $1.23 trillion.
Despite the unknowns in this ever-evolving situation, home purchase originations are still slated to climb 8.3% this year to $1.38 trillion.
While this is generally good news for the mortgage industry, it’s probably wreaking havoc on loan servicers and mortgage investors who are seeing prepayment speeds go through the roof.
Additionally, it’s going to make it difficult for mortgage companies to get their staffing right if mortgage rates all of a sudden U-turn, and in any case, once the party comes to an end.
Read more: How soon can I refinance my mortgage?