What Does the $2 Trillion Government Response to COVID-19 Mean for Homeowners?
April 14, 2020
The novel coronavirus (SARS-CoV-2) has brought the global economy to a virtual standstill. The trickle-down effects include empty supermarket shelves, shortages of medical supplies, plummeting oil prices, and rising unemployment.
Like past disasters, the COVID-19 pandemic has impacted an asset that, for many Americans, represents a safe haven — their homes. In fact, many mortgage holders now have questions about their ability to keep up with their payments.
The U.S. government has sought to provide answers in the form of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Signed into law on March 27, the CARES Act will ultimately release $2 trillion in federal financial aid, an estimated $560 billion of which has been earmarked for individuals.
How does the CARES Act help American homeowners? Moreover, what does COVID-19 mean for anyone currently buying or selling a home? Read on to learn more.
Does The CARES Act Provide Direct Financial Assistance To Homeowners And Mortgage Holders?
Not specifically. The U.S. Department of the Treasury will be issuing stimulus checks, otherwise known as “economic impact payments,” over the next several months. A majority of Americans will be receiving $1,200. These are general-purpose funds that could be used to cover a mortgage payment or payments.
Additionally, the unemployment benefits expanded by the CARES Act may be put toward housing costs.
For more information about these forms of direct financial assistance, their eligibility requirements, how they are being calculated, and how they are being distributed, please refer to our FAQ on this topic, “What Do the New COVID-19 Laws and Regulations Mean for Your Personal Finances?”
If I Can’t Get Help Paying My Mortgage Through The CARES Act, Can I Claim Hardship And Get Forgiveness If I Temporarily Stop Paying My Mortgage?
If your home loan is federally backed, you may qualify for mortgage forbearance.
A forbearance agreement allows you to pay less on your mortgage for a limited time, or to pause your mortgage payments entirely (again, for a limited time). Forbearance should not be confused with loan forgiveness. Any deferred or reduced payments must be made up once the forbearance period ends.
What Is A Federally Backed Mortgage?
Federally backed home loans are insured by the Federal Housing Administration (FHA), the Department of Veterans Affairs, the U.S. Department of Housing and Urban Development (HUD), or the Department of Agriculture. Mortgage holders can also apply for forbearance if any of the following conditions apply.
- The loan is guaranteed under the provisions of the Home Equity Conversion Mortgage (HECM) Program, as specified by the National Housing Act, section 255. These home equity conversion mortgages are also known as reverse mortgages.
- The loan is guaranteed under the provisions of the Housing and Community Development Act of 1992, section 184 (for Native Americans), or 184A (for Native Hawaiians).
- You purchased your loan or have had it or securitized by either the Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac).
What Are The Terms Of Forbearance For These Federally Backed Mortgages?
The CARES Act permits homeowners experiencing COVID-19-related financial hardship to request up to 180 days of loan forbearance from their lender, with the option of an additional 180-day extension. During this forbearance period, borrowers will not be subject to late fees, penalties, or interest.
In addition, the CARES Act mandates a temporary moratorium on foreclosures of homes purchased with federally backed mortgages. This moratorium is currently set to expire on May 17, 2020.
I Live In A Condominium/Townhome/Multifamily Development. Can I Request Forbearance On My Mortgage As Well?
Yes, if you are a tenant. That is, the CARES Act allows mortgage holders with federally backed loans to apply for loan forbearance on individual condominium (or cooperative) units.
How Do I Apply For Mortgage Forbearance?
Contact your mortgage servicer to request a forbearance.
If you need help determining who services your home loan, please consult this FAQ — “How can I tell who owns my mortgage?” — posted by the Consumer Financial Protection Bureau (CFPB).
Please note that the CARES Act does not require borrowers requesting a forbearance to provide documentation or proof of financial distress.
What If I Don’t Have A Government-Backed Mortgage?
Conventional mortgages — home loans issued by either a traditional lender, such as a bank, or an alternative lender (also known as non-bank lenders) — are not covered under the CARES Act.
However, federal regulators, including officials with the CFPB, have instructed mortgage lenders to provide reasonable accommodations to borrowers who may not be able to meet their financial obligations due to COVID-19.
If this describes your situation, contact your mortgage servicer (or lender) to discuss your options.
What If I’m A Renter? How Can I Get Help?
Both the federal government and the State of Texas have taken measures to assist those who may not be able to pay their rent because of the effects of COVID-19. These measures include moratoriums on evictions.
For example, under the CARES Act, tenants living in federally-backed housing — that is, whose landlords have mortgages secured by the FHA, HUD, etc. — are protected from eviction for 120 days retroactive to March 27, 2020.
For more information about renters’ assistance for Texans, consult the Texas Department of Housing and Community Affairs (THCA) website, or download this list of resources curated by the Texas Apartment Association (TAA).
I’m Searching For Affordable Housing. Where Can I Go For Help?
The CARES Act appropriates more than $17 billion in COVID-19 emergency funding to the Department of Housing and Urban Development (HUD). That total includes approximately $220 million in assistance for Texas residents.
To learn more about HUD’s housing vouchers, public housing subsidies, support for elderly persons seeking housing, and renter’s assistance programs, visit the agency’s website.
Is Now A Good Time To Be Shopping For A Home?
Because of the coronavirus pandemic’s impact on the economy, many realtors have reported a significant decline in demand for their properties. Consequently, sellers may have an incentive to offer favorable terms to would-be homebuyers.
However, if you are uncomfortable making a financial decision of this magnitude without inspecting a property in person, now may not be an opportune time to purchase a home. COVID-19 social distancing recommendations have moved much of the home buying process online to ensure the health and safety of all parties involved. Instead of attending a traditional open house, expect to take a virtual home tour.
Buyers should also plan for the home buying process to take longer than usual. Closing on a home still requires much “wet ink,” from signatures on paper contracts to third-party verification provided by witnesses or notaries public. Shelter-in-place orders have not only complicated what is a face-to-face process, but it has also reduced hours of operation and staffing levels at those government agencies that handle residential real estate transactions.
I Put My Home On The Market Right Before The Coronavirus Outbreak. What Should I Do?
First and most importantly, don’t panic. Although the marketplace is experiencing a certain amount of COVID-19-related turmoil, motivated buyers are still looking for new homes right now.
Given current conditions, open houses are inadvisable. Accordingly, sellers should focus on making their online listings as appealing as possible. Work with your realtor to create a 3D walkthrough of your property so prospective buyers can tour your home while simultaneously following medical experts’ recommendations for social distancing. Also, you might consider downloading a video conferencing application so you can conduct virtual tours with interested parties.
Is Now A Good Time To Refinance My Mortgage?
Current mortgage rates are in flux because of the coronavirus’s impact on the U.S. housing market. And, as noted, increasing economic insecurity and stay-at-home orders have put a damper on the typically busy spring home-buying season.
Although it is still too early to know the degree to which COVID-19 has depressed the housing market, initial figures collected by Realtor.com suggest that March 2020 home sales could be down between 5 and 10 percent compared to March 2019. Additionally, new mortgage applications over that same period may have fallen by more than 20 percent.
That said, interest rates remain relatively low — between 3.4 and 3.25 percent, on average, for a 30-year, fixed-rate mortgage. However, with any rise in demand, these rates will rise. The Federal Reserve is working to stabilize the market by purchasing mortgage-backed securities.
The question of when or if you should refinance your mortgage depends on your needs and financial situation. On the one hand, if the high monthly payments required by a 15-year loan are becoming a hardship, you could swap that loan out for a more affordable 30-year mortgage. Alternatively, if you want to bring stability to your long-term financial outlook, you might consider exchanging your adjustable-rate mortgage for a fixed-rate loan.
Be aware that refinancing your home loan will require you to pay closing costs and taxes, which may offset the benefits of a lower interest rate or monthly payments. Additionally, the same delays affecting new home purchases may affect your refinancing application. To determine the refinancing option that makes the most sense for you, work directly with your lender.
Is More Help On The Way?
Very possibly. As of the week of April 13, 2020, Congress was still debating what the next round of COVID-19 relief legislation should include. Of immediate concern are programs targeting small businesses, while the most controversial proposals surround direct assistance to state and local governments.
In the meantime, we here at Guaranty Bank & Trust remain committed to keeping our valued customers informed and educated about COVID-19, their financial accounts, and their wealth. If you have additional questions about the CARES Act, we invite you to refer to our previous installments in this content series.
- “What Do the New COVID-19 Laws and Regulations Mean for Your Personal Finances?”
- “How Does the Government’s Response to the COVID-19 Pandemic Help Small Businesses?”
Stay tuned for future installments, too, as we will be covering COVID-19 and your retirement accounts, how to protect yourself from COVID-19 related scams and phishing schemes, maintaining your credit rating in times of financial uncertainty, and more.
Of course, if you need immediate assistance, call our Customer Care Center at 888-572-9881. Any of our friendly, caring, and collaborative team members will be happy to attend to your concerns.