As the national unemployment rate continues to rise leaving millions of Americans scrambling to figure out their new financial landscape, it leaves some big questions open: What happens if I can’t pay rent due to COVID-19? What happens if I can’t pay my mortgage due to coronavirus? How can I protect myself without becoming homeless, destroying my credit and going bankrupt?
You can learn more about Coronavirus Relief Options regarding student loans here and taxes/income/small business relief options here.
Table of Contents
Coronavirus Relief Options When You Can't Pay Rent Or Mortgage
Tips for everyone
- Document everything surrounding your financial hardship
- Things to document around your financial hardship
- Document everything between you and your landlord or mortgage servicer
- Understand implications of choices/actions
- Find out who owns your building/loan
- Can renters go on strike?
- Can renters be evicted during the pandemic?
- What is the impact of an eviction?
Today we are going to look at the CARES Act (Coronavirus Aid, Relief and Economic Security Act), it’s options for homeowners and renters, and what you can be doing to protect yourself right now whether you qualify for federal, state, or local relief currently or not.
First, I want to thank Lexington Law for sponsoring this post. Lexington Law is a trusted leader in credit repair. They specialize in helping their clients with unfair, inaccurate, and unsubstantiated items on their credit profile. As you go to take advantage of some of the relief options available to you, it’s wise to ensure your credit profile is accurate and up to date. Historically, 1 in 5 Americans have a mistake on their credit report so give Lexington Law a call today for your FREE credit report consultation here.
Document, document, document
Is the mantra we live by for all things financial and it certainly applies during a financial crisis.
Document everything surrounding your financial hardship
The landscape is constantly changing at a federal and state level to support those experiencing hardships due to Covid-19. In other words, if you don’t qualify today, you may qualify for breaks or benefits tomorrow.
The more you can document your financial hardship, the better off you’ll be for either qualifying or protecting yourself if you need to take any sort of legal action.
Things you should consider documenting around your financial hardship:
- Pay stubs reflecting decrease in hours or payment from job
- A decrease in revenue from self employment
- Any communications from your employers or clients that are cutting hours/services, laying you off, or putting you on leave and showcasing why you'll be unable to make payments.
- Decreases in your stock portfolio.
Document everything between you and your landlord or mortgage servicer
You are not the only one experiencing hard financial times right now, landlords and mortgage companies are too. In fact, there are projections that some mortgage services may go out of business. And landlords are in a tough position too, if renters don’t pay, then they may need to answer to their lender.
Document conversations using a voice recorder or app on your smartphone; even if the call is already being recorded, make your own recording too.
Save any emails or written communications as well. If you have a conversation that’s not in writing or recorded, send a written recap, ideally with a read receipt and asking for confirmation that all the facts are correct.
Understand implications of choices/actions
As always, before receiving benefits, agreeing to new terms, missing payments, or any new action, make sure you fully understand the impacts and implications of your choices. Will it mean eviction? How will it impact your credit profile? What will new rates or payment plans look like? In other words: read the fine print and ask questions about how it will affect you in the short and long term.
Find out who owns your building/loan
For both renters and homeowners, you’ll want to find out who the property is financed by in order to help determine any relief programs available to you like delay payment temporarily, avoiding late fees, and any suspensions in legal proceedings for foreclosure of eviction.
Typically this is either “Freddie Mac” or “Fannie Mae” or FHA. If you are a homeowner you may already know this. If you don’t know it, you can look up your loan for Freddie Mac here, and Fannie Mae here.
In addition for renters, this database can help you figure out if your rental is subsidized by a program run out of the Department of Housing and Urban Development for Low Income Housing Tax Credits, which is also protected under the CARES Act.
State and local laws may help you as well. Here’s a list of actions states and cities have taken to curb eviction.
Can renters go on strike?
Yes, the #CancelRent movement has been growing strong and steady and is most likely the largest rent strike in decades. Social justice organizations have joined forces in the We Strike Together movement which is counting over 190,000 rent and mortgage strikes.
Individual implications for not paying rent will vary, so again, do your research and make informed choices for how you’ll proceed.
Can renters be evicted during the pandemic?
It depends on several factors including what type of mortgage their landlord has and where the renter lives.
Some states have taken no action to protect tenants during Coronavirus, others have taken minimal steps to protect them, while others have significantly blocked landlord's ability to evict. Princeton University’s Eviction Lab has a helpful scorecard for each state based on their Covid-19 housing policies. The National Consumer Law Project also has detailed guides on eviction moratoriums for each state.
With that said, according to Eric Dunn, director of litigation for the National Housing Law Project, “if a tenant’s lease has expired and the person hasn’t moved out, the landlord is required to take the tenant to court and cannot lawfully resort to ‘self help’ such as changing locks or disconnecting utility service.” He continues to explain, “It’s kind of a legal twilight zone where the tenant may not have the ‘right’ to possession of the premises, but does have the right not to be evicted except through judicial means.” So you could buy yourself some time knowing your legal rights, but it may not protect you fully from eviction.
If you have more questions, Fannie Mae’s renter hotline number is 1-877-542-9723 and Freddie Mac’s renter hotline number is 1-800-404-3097.
What is the impact of an eviction?
Evictions stay with you for 7 years and may impact your credit score, ability to get a rental, employment opportunities, and lending opportunities. You can read more about the impacts of an eviction on your public record and how to remove them here from Lexington Law.
What if you can't pay for mortgage this month due to Covid-19?
Forbearance may help you if you cannot pay your mortgage on time this month due to coronavirus. Forbearance is when your lender (aka mortgage servicer), allows you to pause or reduce your mortgage payments temporarily. You can learn more about your coronavirus mortgage relief options here from Lexington Law.
There are several types of forbearance that vary by loan type; but none of them erase what you owe. Meaning you will have to make up any missed or reduced payments.
How to get started with mortgage forbearance:
Start by gathering all the information you’ll need to ask for a mortgage forbearance including:
- your loan account number,
- proof of financial hardship due to COVID-19
- how long you expect the hardship to last
- an accurate view of your personal finances like income, benefits, expenses, etc.
Then you’ll want to contact your mortgage servicer. You can find their phone number and address on your monthly mortgage statements to discuss your forbearance plans. You can learn more about the next steps in requesting a mortgage forbearance from Lexington Law here.
What to do at the end of your temporary relief period
The mortgage servicer will most likely be able to work with you for a temporary relief period. Around 30 days before your plan is scheduled to end, they’ll likely reach out to you to figure out which repayment program is best for you at that time based on your current circumstances and what you’re eligible for.
Some common scenarios include:
If you can pick up your normal monthly mortgage payment, you may qualify for a payment deferral where you’d repay your missed mortgage payments at the time of a sale, refinancing, or the end of the loan.
If your income was reduced and you can’t afford your regular monthly mortgage payments, you may qualify for a loan modification which would make your monthly payments more affordable under your new circumstances.
Paying a higher monthly mortgage payment for a period of time to repay missed payments, while not having to pay them back all at once
Does forbearance impact your credit score?
Forbearance does not affect your credit score, but it will show up on your credit report. You can read more about the impacts of forbearance and credit here from Lexington Law.
For homeowners who can still afford their regular mortgage payments:
Refinance for lower rate! That’s what we just did. Mortgage rates have been lower due to the recent financial crisis than they were last year when we bought our home. Consider calling your lender and seeing if it would make sense for you to refinance your home. We were able to save a few hundred dollars a month doing so.
Remember, this is a rapidly changing situation, so document as much as you can. Make sure everything is accurate, especially on your credit profile, so if you do need to take advantage of relief options you record will paint you in the best possible light. If you are unsure about items or accuracy of your credit report, contact Lexington Law here; they understand just how stressful these times are and can possibly help. With all of that said, stay in contact with your landlord or mortgage servicer to get the most up to date and accurate information. Always ask questions and fully understand what you are agreeing too.