Covid-19 mortgage relief ends soon for millions of homeowners
When Jen and Brian Bononi signed up to defer their mortgage payments last April, they figured it would be for up to six months.
Almost a year later, not much has changed for the couple. Ms Bononi’s autoimmune disease makes her search for another job as a social worker for the Covid-19 pandemic dangerous. And Mr. Bononi’s income as a behavioral health counselor alone is not enough to cover his monthly mortgage payment of about $ 2,000 on top of his other expenses.
Mortgage forbearance has been a financial lifeline for many Americans sailing the economy ravaged by the pandemic, allowing homeowners to eliminate what is often their biggest bill for months at a time. But relief programs, largely designed to last up to 12 months, are expected to expire in the coming months, a major challenge for borrowers who are still out of work or earning less than before the pandemic.
More than half of the 2.7 million active forbearance plans are expected to end for good in March, April, May or June, according to the mortgage data firm.
Black Knight Inc.
“The biggest concern to me is the number of people whose forbearance programs are going to end this spring,” said Ralph McLaughlin, chief economist at Haus, a real estate finance start-up. “Those who were hit the hardest at the start and still haven’t found a job are going to be in dire straits.”
The Federal Care Act, passed last March, allowed borrowers to defer payments on federally guaranteed mortgages for as long as 12 months. About 75% of US mortgages are guaranteed or insured by the US government, according to Black Knight. Nearly one in 10 homeowners signed up for forbearance at the peak of program usage last June.
Like other consumer assistance programs developed during the frantic early days of the pandemic – lenders have also let struggling borrowers skip payments on credit cards and auto loans, and the government has suspended payments on federal student loans – mortgage loan forbearance was seen as a short-term solution, a way to buy time for the economy to recover and consumers to get back on their feet.
The deal worked for many owners. Some suspended their payments when they were made redundant, then started paying again when they found new jobs. But others are still struggling. Fewer borrowers have abandoned forbearance plans in recent weeks, and the share of Americans unemployed for more than six months has been on the rise.
Lenders are expected to work with borrowers when forbearance plans expire, and there are rules to prevent them from having all of their missed mortgage payments repaid all at once if the loan is guaranteed by the government. Lenders can also offer modifications such as lower interest rates or longer terms to lower the monthly bill, but borrowers generally need to be employed to qualify for a loan modification.
“The hope is that people will find jobs, have some form of income outside of unemployment benefits or stimulus payments, so that they can benefit from changes,” said Marcel Bryar, founder of the company. Mortgage Policy Advisors advice. “If you can’t get a job after this forbearance ends, the reality is you won’t have the income to even afford a modification because nothing would be affordable to you.”
Many of the borrowers who still defer payments have Federal Housing Administration loans. FHA borrowers typically have lower incomes and lower down payments than those
borrowers. Job losses during the pandemic disproportionately affected low-wage workers, including employees of restaurants, hotels and shopping centers who have been devastated by the home economy.
The forbearance at the Bononis house in northwest Washington state will expire in April, but they don’t expect to be able to restart payments at that time.
Ms Bononi, 46, said she was not eligible for unemployment because she quit her job voluntarily due to her autoimmune disease. She added that she had applied for disability insurance from the Social Security administration in 2019, but had not yet been approved.
If payments haven’t started in April and the couple can’t extend their tolerance, Ms Bononi, who is a graduate student, plans to take out student loans to cover the family’s mortgage payments at Umpqua Bank.
“This is our first home, so the thought of losing it after working so hard to get it would be devastating,” Ms. Bononi said.
Kevin Skinner, head of home loans at Umpqua Bank, said the bank had added resources “to help our clients take full advantage of the relief options available.”
“We know this is a difficult time for many homeowners affected by the pandemic, and we are committed to working proactively with every customer whose loans we serve,” said Skinner.
Even if forbearance plans are extended, some homeowners will still end up facing foreclosure when their plans finally expire, according to economists and industry consultants.
Still, there is a significant difference from the 2007-2009 recession. Back then, lenders shut out millions of borrowers, many of whom owed more than their homes were worth due to falling home prices. This time, house prices are rising across the country, so if the owners have to sell, they can probably make a profit.
The Department of Housing and Urban Development, which sets guidelines for FHA lending, plans to announce additional relief measures for homeowners in the coming weeks, including those who have been forbearing since. nearly 12 months, a spokeswoman said.
“HUD is committed to providing assistance to homeowners who need it and helping families keep their homes and avoid foreclosures during this pandemic,” the spokesperson said.
The Biden administration said last week that it plans to bring together representatives from real estate agencies in the coming days to work out a plan around the end of the tolerance, according to a White House spokeswoman.
For now, the owners are waiting to know their fate.
Ron Melancon was fired from his job as a costume salesman last spring. The part-time hours that her job currently offers her do not allow her to pay the payments on her family’s house in Glen Allen, Virginia.
Mr Melancon, 56, said he was not sure what he would do next month when his abstention from the loan manager
Mr. Cooper Group Inc.
expired. He’s driven for rideshare companies in the past, but he’s afraid to bring the coronavirus back to his family and costly repairs his minivan might need if it adds to the more than 200,000 miles already driven.
He hopes he can defer mortgage payments beyond March, until he can find another full-time job.
“I am not looking for a document,” said Mr. Melancon. “I’m looking for a hand.”
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Eli Anderson and his wife were planning to refinance their Seattle area home last year. But when the concert hall where Mr. Anderson worked closed its doors last March, their goal is simply to make their mortgage payments.
They quickly agreed to forbearance from Caliber Home Loans Inc. After 10 months, the missed payments total more than $ 20,000. Their plan ends in April.
“We just agreed to deal with it later, which is very scary but also kind of necessary,” said Anderson, 39. “Because nobody knows what’s going on right now.
Write to Orla McCaffrey at [email protected]
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