A guide to paying your mortgage if you’re impacted by coronavirus
The outbreak of coronavirus (COVID-19) has affected the global economy, including the housing market and mortgage industry. Coronavirus has put millions of people out of work, unable to afford their mortgage, and at risk of foreclosure. For others who are looking to buy a home or refinance a mortgage, this may be an opportune time as coronavirus has indirectly led to lower mortgage rates.
In response to the crisis, on March 18, 2020, the U.S. Department of Housing and Urban Development (HUD) has issued a 60-day moratorium on foreclosures and evictions for mortgages backed by the Federal Housing Authority (FHA). Single-family mortgages backed by Fannie Mae and Freddie Mac will also suspend foreclosure and eviction proceedings for 60 days and homeowners may be eligible for reduced or suspended payments for up to 12 months.
The federal government has not made any formal announcements regarding relief for conventional mortgage borrowers, but some state and local governments have taken action to waive payments. The most important thing to do if you can’t make your mortgage payment is to call your loan servicer and find out what options are available to you.
How the coronavirus affects mortgages
To prevent the community spread of COVID-19, many states have forced businesses to close and cancel events if they haven’t done so already, resulting in a loss of income for millions. Hospitality, service, and entertainment industry workers have been especially hit hard. Because many Americans do not receive paid sick leave, thousands of vulnerable people may struggle to pay their bills, including mortgage payments.
Failing to repay a mortgage can result in foreclosure, the process by which the lender seizes your home and evicts you if necessary. Some cities like Los Angeles have put limitations on foreclosure and eviction proceedings during the pandemic. In New York, Governor Andrew Cuomo announced that mortgage payments would be waived for 90 days for homeowners facing hardship due to COVID-19.
What to do if you can’t pay your mortgage due to the coronavirus
If coronavirus has affected your ability to make your monthly payment, let your loan servicer know as soon as possible no matter what type of mortgage you have. Even if your lender has halted foreclosure proceedings during the pandemic, you might want to have it on record that you notified them in case they do try to take action against you.
Keep in mind that the mortgage lender would prefer not to foreclose, since the process can be time-consuming and costly. Given the wide-reaching effects of coronavirus, many lenders and loan servicers may be more willing than usual to work out a resolution to help you keep your home.
The mortgage lender may offer you forbearance, which lets you postpone or reduce your payments temporarily. Keep in mind that forbearance is not forgiveness; you’ll have to repay what you owe later down the line. But for many borrowers who expect their incomes and financial circumstances to return to normal after the coronavirus, forbearance may provide a necessary temporary relief.
Fannie Mae and Freddie Mac, government-sponsored enterprises that guarantee mortgages, have offered forbearance options for up to one year due to hardship and instated additional measures like waiving late fees and not reporting payment delinquency to credit bureaus.
Mortgage rates and the coronavirus
If you’ve been listening to the news lately, you’ve probably heard a lot about mortgage rates. The sharp economic downtown has caused lenders to slash rates in effort to attract more borrowers, though there have been a few small increases over the past few weeks. As a result, interest rates for 30-year fixed-rate mortgages are the lowest they’ve been in years.
Additionally, fear surrounding the COVID-19 pandemic and the government’s inadequate response has affected mortgage rates by setting off a chain that triggers investors to buy more mortgage-backed securities (MBS), ultimately causing rates to decrease dramatically.
It is difficult to predict where the rates are going. If you’re interested in the mortgage rates and if and how they’re affected by the coronavirus, you can read our full analysis of mortgage rates updated on a weekly basis.
Refinancing during the coronavirus outbreak
Lower mortgage rates are usually what get homeowners thinking about a refinance. Mortgage refinancing requires an income assessment similar to when you took out the original mortgage, so the rate extended to you by a lender will still depend on your financial credentials, like credit score and income. In spite of that, it might still be a good time for many homeowners to refinance while rates are low. If you think you fall into that boat, read this guide on when to refinance a mortgage.
Should I buy a house during the coronavirus?
A lower interest rate ultimately means a lower monthly mortgage payment for homeowners. If you’re looking to buy a home during this time, you might be able to get a good interest rate, but the pandemic may pose other hindrances on the homebuying process.
As people continue to self-quarantine and avoid social interactions, real estate agents may choose not to show properties or hold infrequent open houses. Sellers may pull their homes off the market because their situations have changed — they may be unable to sell their home until they purchase a home, which has become complicated during the coronavirus outbreak — or simply out of concern for their health and future economic uncertainty.
On the other hand, buying a home can bring you a certain measure of security. People who lock in a low rate for a fixed-rate mortgage will have a financial advantage after rates go back up — if they’re confident they’ll have a stable stream of income in the future. And if you’re ready to put down roots on a place you love, learn how write the perfect home offer letter.
By: Elissa Suh | 4/6/2020 | https://www.msn.com