We’re about a month into our new normal with coronavirus. The pandemic is seemingly impacting most people in many ways, most notably financially. One area affecting many people right now is rent and/mortgage payments. Those bills are due and many people aren’t sure how to pay them right now.
Losing your job or having your hours cut back, makes it incredibly difficult to pay rent/mortgage unless you have a very healthy emergency fund. Many people are not in that position, leaving most looking for emergency mortgage relief or rent payment assistance.
Thanks to the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), there is relief to help with these bills. This guide shares everything you need to know about how to manage your mortgage and rent payments during the pandemic.
The CARES Act Explained
Congress passed the CARES Act on March 27, 2020. The Act provides direct assistance to people facing uncertain financial circumstances as a result of COVID-19.
The law is the third stimulus package passed by Congress. Here are a few of the higher-level benefits it includes:
- Recovery rebate checks of up to $1,200 per adult and $500 per child
- Increased unemployment insurance benefits
- Interest-free forbearance on most federal student loans
- Suspension of required minimum distributions for retirees
- Tax filing extension to July 15
Rebate checks are coming out in waves. If you’re asking yourself “Where is my stimulus check from the IRS?”, read our guide to learn how to verify the status of your funds.
One other key component of the CARES Act is federal mortgage relief and rent protections. Mortgage payment assistance begins on the date the CARES Act was passed, which was March 27, 2020.
You can put your mortgage payments in forbearance for up to 180 days from March 27. It’s possible to extend that for another 180 days, but there is no guarantee.
*Related: Congress just extended protections for most government-backed mortgages until August 31, 2020.
The coronavirus rent assistance is a little less generous, but the Act does provide ways to seek relief.
Who Qualifies for the Mortgage Relief Programs?
The federal government is a big believer in homeownership as a means to grow your wealth. It believes in it so much that it owns or backs many mortgage loans.
If you have a federally backed mortgage loan, you likely qualify to receive assistance under the coronavirus mortgage relief program.
The following mortgage types qualify for assistance:
- Purchased by Fannie Mae or Freddie Mac
- Insured by the Federal Housing Administration (FHA) – this includes reverse mortgages and Home Equity Conversion Mortgages (HECMs)
- Guaranteed, provided, or insured by the Department of Veterans Affairs (VA)
- Guaranteed, provided, or insured by the Department of Agriculture (USDA)
- Guaranteed under HUD’s Native American or Native Hawaiian Home Loan Guarantee programs
You can read more about these and additional questions from the U.S. House Committee on Financial Services here.
Who Owns My Mortgage?
As you can see above, there are numerous types of mortgage loans. If you don’t directly know who owns your mortgage, you may wonder if you qualify for COVID-19 mortgage relief.
Thankfully, there are resources you can use to determine the type of mortgage loan you have. Here are websites to use to determine who owns your mortgage:
If you’re like me and felt overwhelmed by the paperwork when receiving your mortgage, don’t fear. Contact your loan servicer to determine your mortgage type.
Just be prepared for long wait times.
*Related: Looking for affordable home owner’s or renter’s insurance? Check out Liberty Mutual Insurance. Get a quote online and instantly save at least 12 percent.
What Happens to My Mortgage Payments?
The mortgage relief lets you apply for forbearance of your mortgage for up to 180 days. That means you do not need to make payments for that period.
You must attest that your finances have been impacted directly or indirectly by coronavirus.
Losing a job or a reduction in hours is undoubtedly a qualifier.
If you can attest to financial hardship, all you must do is call your servicer and request the forbearance. If you need mortgage help after that, you can call and request an extension for another 180 days.
Can I Stop Paying My Mortgage?
Yes, you can stop paying your mortgage under the relief. However, you must call your loan servicer to request the forbearance. You can’t just stop making payments.
Remember that interest will continue to accrue. It also doesn’t forgive your mortgage.
It merely allows you to put your payments on hold until you get back on track.
What Happens at the End of the 180 Days?
If you’re still facing financial hardship at the end of the 180 days of forbearance, you can apply for another extension. However, there is a deadline for that.
The deadline is either the end of the national state of emergency or December 31, 2020, whichever is sooner.
Additionally, there is still some confusion with what will happen after your forbearance is over.
Reports indicate some lenders may ask for a lump sum payment for the amount missed over the forbearance, while others will extend the life of the mortgage by the number of payments you miss.
The former will obviously pose problems for most. Your best option is to contact your servicer and see what they require.
Communication is essential during these times to ensure you know what to expect.
Will I Face A Foreclosure?
As long as you stay in your home and apply for the government mortgage relief program, you are protected against foreclosure.
If you have a federally-backed mortgage, the CARES Act provides a 60-day moratorium against foreclosures. That moratorium ends on May 18, 2020.
The government may extend the moratorium after that, but only time will tell. It’s crucial to avoid scammers offering assistance.
You already have a moratorium, so don’t fall prey to scam artists trying to take advantage of your situation.
Will This Hurt My Credit Score?
Missing mortgage payments is an excellent way to cause your credit score to drop. Thankfully, the CARES Act offers a 120-day protection against the reporting of missed or partial payments.
This protection begins from January 31, 2020, and missed payments will not impact your credit score.
Other Options for Assistance
Not all loan types qualify for mortgage relief under the CARES Act. If you have a mortgage that is not federally backed, don’t fear.
Many other loan servicers are offering mortgage assistance programs for those impacted by COVID-19. Reach out to your servicer to learn how they can help you.
Don’t just stop making payments. Communicate with your loan servicer regularly to inform them of your situation and see how they can help.
If you can continue to make payments without facing economic hardship, do that. You may even want to consider refinancing your loan to lower your interest rate.
You can use LendingTree to compare rates from five different lenders to see which works best for your needs.
If you can lower your rate by at least .75 percent, it may make sense to refinance. We looked into refinancing our home recently, but the reduction was not enough for us to take advantage.
Are Rent Assistance Programs Available?
While not as extensive as mortgage assistance, the CARES Act provides help to renters unable to make their rent payments.
It depends on the type of mortgage the landlord has for you to qualify for rent relief. If it qualifies, there is a 120-day moratorium against eviction due to a lack of rent payments.
Additionally, the landlord can’t charge you fees for lack of payment.
Types of Properties that Qualify for Protection
Like mortgage assistance, rent assistance programs are available to those who live in rentals with federally-backed mortgages. These are known as covered dwellings and include the following:
- Public housing
- Section 8 Housing Choice Vouchers
- Section 8 Project-Based Rental Assistance
- Section 202 Supportive Housing for the Elderly
- Section 811 Supportive Housing for Persons with Disabilities
- Housing Opportunities for Persons With AIDS (HOPWA)
- McKinney-Vento Homeless Assistance grants
- Section 236 Preservation program
- HOME investment partnerships
- Rural Development multifamily housing (Section 516 Farm Labor Housing Grants, Section 542 Rural Development Vouchers, Section 521 Rural Rental Assistance, Section 533 Housing Preservation grants)
- The Low Income Housing Tax Credit (LIHTC) program
All of the federally-backed mortgages that fall under the assistance program also apply to rental homes. So, if your landlord has a Fannie Mae, Freddie Mac, FHA, VA, USDA, or HUD-backed mortgage, you qualify for rent relief.
Your best bet is to ask your landlord what type of mortgage he or she has to see if you qualify.
As with a mortgage provider, don’t avoid the situation. Communicate regularly. Your landlord may even allow you to break up payments over the course of the month to ease your burden.
You can read more about rental assistance from the U.S. House Committee on Financial Services here.
What Happens if My Rental Does Not Qualify?
You may live in a rental that does not offer assistance in the CARES Act. Don’t fret as it’s possible to still receive help.
Numerous cities and states are banning evictions during this time. Motley Fool has put together an extensive list of locations giving eviction protections.
If in doubt, check your local news and communicate with your landlord.
I’m A Landlord, What Should I Do?
If you’re a landlord, you also need to protect yourself during these trying times. As tenants need help paying rent, you likely face the inability to make mortgage payments.
Communicate with your loan servicer. Apply for mortgage assistance if you qualify. If not, contact your servicer to identify what relief they are offering.
Remember to pass similar help on to your tenants as you’re able.
Should I Use My Stimulus Check for Mortgage or Rent?
Part of the CARES Act is stimulus checks of up to $1,200 per adult and $500 per child. If you can’t pay your bills, you may wonder if you should use your stimulus check to make mortgage or rent payments.
It’s always important to prioritize your bills, and it’s ever more important now. It’s best to prioritize your bills in this order:
- If you’re short on money, scrimping on food, and facing utility issues, use the stimulus check towards those first. Don’t stop there.
Do you have other necessities like staple items for your home and medication? Use part of your rebate check to pay for them.
If you live in a dwelling that falls under one of the relief programs, and you have need, it’s best to use the funds to care for necessities or save it for future needs. Only use the funds to cover rent or mortgage if you’re facing homelessness.
We are truly living in unprecedented times. Life is stressful, and financial hardship is common.
You may want to avoid the situation, hoping it will improve on its own. Don’t give in to that desire. Take advantage of the programs you qualify for to help weather the storm.
How are you managing mortgage or rent payments during these times? What are you doing to manage other monthly bills currently? How are you going to use your economic stimulus check?