AARP Answers: Your Mortgage and the Coronavirus
The latest on deferring loan payments, refinancing and more
I'm worried I might not be able to make my mortgage payment. Will my mortgage company help?
In most cases yes. If the Federal Home Loan Mortgage Corp. (Freddie Mac) or the Federal National Mortgage Association (Fannie Mae) backs your mortgage — and they do for about 80 percent of all mortgages — the mortgage giants may waive your payments for up to 12 months. It's called forbearance: You and the lender agree to temporarily reduce or suspend mortgage payments, and the lender agrees not to foreclose during that time. Both Freddie Mac and Fannie Mae have also agreed to suspend evictions and foreclosure sales through June 30.
The U.S. Department of Housing and Urban Development has also imposed an immediate halt to evictions from Federal Housing Administration–insured single-family properties. What's more, it has halted new foreclosures and suspended those in process. The moratorium on foreclosures also applies to FHA-insured home-equity conversion mortgages (commonly known as reverse mortgages). Both moratoriums end June 30.
In September, the Centers for Disease Control and Prevention (CDC) issued a four-month, nationwide eviction moratorium that would have ended Dec. 31. The CDC extended that deadline to March 31, and, on March 29, extended the deadline again until June 30. According to the Census Bureau, 9.6 percent of the population age 55 and above had no confidence in their ability to pay their next month’s rent. The extension also provides criminal penalties for violation of the CDC order by a person of up to $250,000 or one year in jail, or both; and of up to $500,000 for a violation by an organization. These penalties are new. In a letter to the CDC, AARP senior vice president Bill Sweeney urged the CDC to extend the moratorium beyond its current deadline, and to make the moratorium to be automatic and universal, rather than depending on tenants to make the first move.
Does forbearance mean I never need to make up the missed mortgage payments?
No, the deferred payments still need to be made in the future, as a lump sum or tacked on to the end of your mortgage. Forbearance is not the same as loan forgiveness.
How do I know if Fannie Mae or Freddie Mac owns my mortgage?
You can check online to see if one of the mortgage giants owns your mortgage:
Search Fannie Mae: knowyouroptions.com/loanlookup
Search Freddie Mac: ww3.freddiemac.com/loanlookup/
What if my loan isn't owned by Freddie Mac or Fannie Mae?
Contact your lender, explain the reason for your financial setback – perhaps you lost your job because of the coronavirus outbreak — and try to negotiate a forbearance plan. While not obligated to follow the lead of Fannie and Freddie, many lenders may be willing to negotiate during this difficult time.
Are big banks offering mortgage relief?
Yes, on a case-by-case basis. Bank of America, for one, says that mortgage borrowers can request to defer payments, with payments added to the end of the loan. Wells Fargo is suspending residential property foreclosure sales and evictions. Wells Fargo is telling its mortgage customers, “If you’re unable to make your payment due to COVID-19 related hardships, we’re offering a 90-day payment suspension.” And Chase bank asks worried mortgage holders to call to work out a plan. If you need help, be proactive and give your bank a call.
Will making mortgage payments late affect my credit rating?
Under the Freddie Mac and Fannie Mae plans, loan servicers will not report late payments resulting from forbearance to credit bureaus. They will also waive all late fees and penalties. Again, if you don't have a loan with Fannie or Freddie, you'll have to negotiate directly with your loan services. In any case, if you're struggling, be sure to contact your loan servicer sooner rather than later, and be sure to document your coronavirus hardship, such as proof of job loss.
What if I'm a renter?
There's some good news for renters, too. If you live in an apartment and your landlord gets mortgage relief because of the coronavirus outbreak, you can't be evicted for 90 days if you can't pay rent due to your own coronavirus hardship. Freddie Mac and Fannie Mae, in coordination with the Federal Housing Finance Agency, have announced a nationwide relief plan for borrowers who own multifamily properties, as well as their tenants. Under the program, landlords whose Freddie and Fannie loans are in good standing can defer their loan payments for 90 days by showing hardship as a consequence of COVID-19. In turn, Freddie and Fannie are requiring landlords not to evict tenants facing hardship based solely on nonpayment of rent during the forbearance period. Freddie Mac estimates that the program can provide relief for up to 4.2 million U.S. renters at more than 27,000 properties.
That still leaves 40 million renters without protection, primarily those who rent from smaller landlords. Some cities, such as Los Angeles, Boston and New York, are putting halts on evictions. But if you’re not covered by a state or municipal ban on evictions, talk to your landlord as soon as possible to discuss your options.
Rates are low. Should I refinance my mortgage?
The average 30-year fixed mortgage rate was 2.79 percent the week ended January 21, according to Freddie Mac. The rule of thumb is that you should consider refinancing only if the new mortgage rate would be 1 percentage point lower than your current rate.
But there are plenty of variables, such as fees and points. (A point is an upfront fee equal to 1 percent of the loan; the more points you agree to pay, the lower your rate.) Will you stay in your home long enough for the lower rate to offset the cost of fees and points? You can crunch the numbers using mortgage calculators such as those offered by Bankrate, NerdWallet, HSH, SmartAsset and others.
Refinancing demand is high, and it may take longer than usual to get appraisals and title searches as government offices shut down because of the coronavirus epidemic. You may also have to do a virtual closing via videoconference, to maintain social distancing safety guidelines. Ask your bank how long their refinancing process takes, and whether they are reasonably sure that they can close the deal in a reasonable amount of time.
(Editor's note: This article was updated with additional information.)