Americans are turning to banks for a life preserver and lenders are throwing them an anvil!
As many unemployed Americans struggle to pay bills, the United States Congress passed the Coronavirus Aid, Relief and Economic Security Act or the “Cares Act” to help those effected stay afloat.
Covid-19 (or Coronavirus) hit America and the world like a meteor strike. At the time of this blog, over 730,000 US citizens have been diagnosed as positive and the virus has claimed over 40,000 lives. Social distancing measures and stay at home orders are protecting Americans but attacking and rapidly breaking down the US economy. Fortune magazine reported that in the last month, 22 million Americans are out of work and unemployment is nearing the rate of job losses during World War II (19.0%).
“The highest rate of U.S. unemployment was 24.9% in 1933, during the Great Depression”
One provision of the CARES Act is to aid homeowners who cannot pay their mortgage. Under this act homeowners only need to call and request mortgage relief from their lender. Michelle Black, a leading credit expert and personal finance writer explained, “Once a borrower requests a hardship due to the COVID-19 pandemic, the act requires the servicer to offer a CARES Act forbearance.”
Homeowners Frustrated Over “Cares Act” Use
When applying the CARES Act, lenders will defer mortgage payments 30, 60 or 90 days. Julia Hansen called her lender Freedom Mortgage to ask about deferring mortgage payments. She and her husband Jim both worked in the tourism industry and lost their jobs recently due to the pandemic. Freedom Mortgage said, “they could defer their payments for three months, but with one alarming catch: They’d have to then come up with four months of payments all at once, to make the loan current”
It never surprises me how bad lenders treat homeowners when they need them the most. Roseanne Stoddard waited on hold for two hours before being told by a Bank of America representative that they were only willing to suspend her mortgage payments for three months. Like Hansen, after three months, Stoddard would need to pay all suspended payments at once. Moreover, loan modification or reducing her monthly payment would not be offered as an option.
“At that point, if you don’t pay it, you go into foreclosure,” explained the Freedom Mortgage representative.”
US loans in forbearance have quadrupled since early March. The actual meaning of “Forbearance” is a special agreement between the lender and the borrower to delay a “foreclosure,” not necessarily a payment! Lenders calculate that the majority of homeowners that choose forbearance are likely to default within 8 months. When the CARES Act is doing little to offer a true workout option it is expected that foreclosures will increase sharply . How Have you planned to deal with your lender?
Here is what you need to keep in mind when discussing the “CARES ACT”
- Request for forbearance must be made during the coverage period
- The CARES ACT only applies to federally back mortgages
- A servicer can still foreclose on your property if it is vacant
- All foreclosure filings can begin again on May 19, 2020
- A servicer only has to offer forbearance for “up to” 180 days (it is the lenders discretion; the CARES Act only requires a 30-day forbearance period)
- Fees, penalties and interest are still charged to homeowners that were previously delinquent
Want professional debt settlement advice for a loan modification or the how to negotiate the “CARES ACT”? Please contact our Florida or Georgia office at KJ@EurekaFlorida.com or KJ@EurekaAtlanta.com.
Keith Jackson is a Licensed Real Estate Broker and Appraiser. He is a Debt Settlement Specialists with over 10 years and 10,000 hours of experience in distress sale negotiations.