With current events like the COVID-19 crisis impacting the American economy, many families are worried about their financial future. As a record-breaking 6.6 million U.S. residents file for unemployment benefits (this number could climb much higher), many homeowners and renters may find themselves falling behind on their bills.
Whether you have a small emergency fund or have been living paycheck to paycheck, there is no reason to feel helpless, even in uncertain times. Channel your anxiety about the future into positive action. In this post, we will show you what to do if your mortgage payment or rent is late.
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New State Protections for Homeowners and Renters
On March 18th, the U.S. Department of Housing and Urban Development (HUD) announced a moratorium on all foreclosures or evictions for 60 days under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). That means that owners and renters of HUD properties will not have to worry about losing their homes in a court proceeding until mid-May, even if no payments are made. This does not, however, mean the debt is erased. You will still have to pay what you owe at the end of the grace period or face legal consequences.
Keep in mind that HUD protections will vary by region, and may not apply to all types of HUD housing. It also does not apply to foreclosures or evictions in the works before the Act was approved, nor does it include evictions initiated for reasons other than nonpayment of rent (such as the violation of lease terms). However, the Consumer Financial Protection Bureau (CFPB) is endorsing what HUD is doing and hoping to encourage private landlords and other low-income housing providers to take similar actions.
In addition, many counties and states across the U.S. are also urging landlords, lenders and banks to avoid or stop evictions or foreclosures. Some states, like New York, have suspended mortgage payments for 90 days, but not rents. Other states have offered relief for both homeowners and renters. Nationally, all federally backed mortgages are included in a moratorium on foreclosures (this includes Fannie May and Freddie Mac loans).
What this means is that there could already be rules and regulations at both the federal and state levels that can offer a little breathing room if paying your rent or mortgage is challenging.
Check reputable sources like your local government website or federal sources for accurate information.
What You Can Do Right Now
Even with federal protections for renters and homeowners in place, you still need to take action if you believe you can’t make your rent and mortgage payments. Here are some guidelines on what you can do to help your situation.
Check Your Lease or Mortgage Loan Document
Before doing anything, check your lease contract or mortgage loan document to verify your obligations under your contract. See if there is an option to claim a rent or mortgage payment reduction or pause due to extenuating circumstances. For example, some mortgages or leases may include an “Act of God” clause that will provide payment relief when a renter or homeowner experiences hardship because of a natural disaster or a declared national emergency.
In any case, there may also be specific appeals procedures available for you if you have lost your job and are experiencing financial difficulties, even if your employment status was not impacted by the pandemic. Contact your landlord or lender to explore your options even if you do not believe you qualify for relief.
Contact Your Loan Servicer or Landlord
Call your lender or landlord immediately if you believe you’ll be late for your upcoming rent or mortgage payment.
Landlords who have federally-backed mortgages on their rental properties aren’t allowed to carry out an eviction if tenants fail to pay rent for 120 days from March 18th. They may also be prohibited to charge penalties or late fees during this time.
In many cases, banks and lenders are offering more flexible options for homeowners, like delaying payments with no penalties (though interest could accrue) or interest-only loan repayments (so it is a lower amount since you’re not paying the principal). Some are even accepting partial payments. Fannie Mae and Freddie Mac, for example, recently announced a payment deferral option for homeowners struggling to make their mortgage payments.
Keep in mind, guidelines for mortgage and rent relief vary by region, so research your options well before speaking to your lender or landlord.
Negotiate a Payment Plan
Once you contact your landlord or lender, see how you can work out a payment plan. Larger companies will already have some guidelines in place, so all you have to do is to ask what your rights are and how to take action. In some cases, you may need to provide proof of financial hardship for your lender or landlord to suspend or reduce payments.
If you are hoping to have your lender or landlord suspend payments, work out a plan before you speak with them on how you’ll resume regular payments when you return to work.
For those who qualify for CARES Act stimulus checks, your landlord might expect that some of it will go towards rent. Have an honest conversation about them about other more immediate needs and expenses that you may need to cover (like food) and see what you can negotiate.
Perhaps this news is a light at the end of the tunnel for renters: The National Multifamily Housing Council is encouraging its landlords and property managers to offer affordable rent installment plans and waive administrative or late fees for renters experiencing a loss of income.
If you have negotiated any new agreements, make sure that you have them in writing and they are signed by all concerned parties (you, the lender or landlord, and their representatives). Be certain that everything you talk about is included in the agreement such as the new payment amount, waived fees, and any suspension of payments.
Speak With a Lawyer
It might be a good idea to speak with an attorney before speaking with your landlord or lender to get a better idea of your rights as a homeowner and tenant. Plus, your attorney might be able to guide you on the best phrasing to use when speaking with your landlord or mortgage company.
As for where to look for an attorney, look up tenant rights organizations in your local area or a consumer rights attorney. Even your local legal aid office may be able to provide you with free legal service–you’d be surprised at what a simple online search can yield.
It can feel frightening to not have enough money to pay the bills (or even imagining that you might be close to being in that situation). Hang in there and take action now so that you can move forward with a plan to get your finances back on track.