Corona virus, finances, bankruptcy ... Part 2 ... Government Assistance

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We will make it through this. There is relief available to help people get back on track. Government programs are starting to ramp up but, remember, they have their limitations. Additional help may be needed.

As the crisis worsens, Federal and Local governments are attempting to offer financial relief to the public. One of the actions I have seen in the news is a Federal Government program. Federal regulators announced a Freddie Mac and Fannie Mae federal mortgage relief plan that can give up to a yearlong break on mortgage payments. The announcement is new and I am not sure many details are available. The article (linked above) indicates:

"Under the plan, people who have suffered a loss of income can qualify to make reduced payments or be granted a complete pause in payments."

Homeowners need to follow the plan and have responsibilities too:

 "'That forbearance is up to 12 months, depending on their particular situation,' says Mark Calabria, director of the Federal Housing Finance Agency, which oversees Fannie and Freddie.

Homeowners can't just stop paying their mortgage. 'They need to contact their servicer — that is the lender that they send the check to every month,' he says. 'That lender will work with them to be able to work out a payment plan. Obviously, we hope to get them back on their feet as soon as possible.'"

And here is the keys homeowners need to keep in mind:

• Not all mortgage loans are Freddie Mac and Fannie Mae backed loans;
• A homeowner must "qualify" for this program, which will probably be easy at first and, I suspect, harder as we recover; and
• This is not a forgiveness program, everyone will ultimately need to make up all payments they missed at some point. 

So my point? There may be help and temporary relief out there for homeowners but they need to understand what it is, how it works now, and pay attention to how it changes as we exit this crisis. Keep in mind, if a mortgage payment is $1,500/month and the homeowner has to skip 3 months due to lay-offs or other loss of income, the outstanding balance due in month four will be $6,000. The amount owed does not change. The critical issue is how will catch up payments work? I do not think we have an answer. From what I have read so far, it seems it will be up to the bank and homeowner to negotiate.

Many of us will have no choice but to use this assistance. So, use this relief as necessary. I recommend people try to use only what they need. I know that is easier said than done. If people find themselves missing more payments than they can afford to pay back in the time the bank wants to allow, bankruptcy laws may be the additional help they need. Chapter 13 is set up to let people catch up their mortgage payments over 5 years if needed. Keep in mind, there is other help available beyond the temporary measures being offered now. 

If you want assistance, legal representation, or just want to know more about me, Mark M. Medvesky, or Wells, Hoffman, Holloway & Medvesky LLP, check out our website at www.whhmlaw.com.

Other Links:

Freddie Mac.com Covid-19 Response
Fannie Mae Covid-19 Approach
Bankrate.com Mortgage lenders offer help to borrowers affected by coronavirus
Bankrate.com - Programs to freeze foreclosures and evictions

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