10 Questions Your Customers Have About Mortgage Loan Relief
As the unemployment rate soars and many American homeowners find themselves without a steady paycheck, your borrowers may be wondering if there’s any relief available for their mortgage payments. The good news for them is that there just might be. Thanks to the CARES Act and other new legislation in Washington, D.C. and at the state level, mortgage holders may have the opportunity to pause or defer their mortgage loans for part of the year ahead.
As a company that handles mortgages and financial documents day in and day out, processing borrower requests for loan deferrals or forbearance may feel like second nature, but this isn’t the case for your borrowers.
To help your team provide the support and service customers need in this tumultuous moment, it’s a good idea to revisit this process from your customer’s point of view. Here are 10 questions your customers may have and a few resources you can share to help empower your borrowers to quickly and easily locate the information they need.
1: What’s the difference between loan deferral, forbearance, and forgiveness?
During a period of forbearance, a borrower’s loan payments may be lowered or suspended for a defined period of time. Interest continues to accrue during this time.
Because interest continues to accrue during a period of forbearance, your loan will become more expensive over its lifetime. Before you sign up for forbearance, talk to your mortgage service provider to find out when additional interest will be due or how it will be added to your future repayment schedule.
Deferral is similar to forbearance, but it is typically more difficult to qualify for loan deferral. under some terms of deferral, interest does not accrue. This depends entirely on the terms of your agreement.
Forgiveness means that the borrower is no longer obligated to repay the balance of the loan, including any outstanding interest.
2: Am I eligible for mortgage loan forbearance? If so, is this my only option?
That depends on who provided your mortgage. Homeowners with FHA, USDA, VA, or other federally-backed mortgages including those guaranteed by Fannie Mae and Freddie Mac, may request forbearance (i.e. delayed payment) on mortgage payments for up to 12 months with no fees, penalties, or extra interest.
To find out if your mortgage qualifies for forbearance, contact your mortgage servicer directly to request forbearance.
You almost always have other options. If you do not want to go into forbearance and still have the ability to make partial loan repayments, you may want to pursue a different repayment plan. Your mortgage service provider will be able to assist you with exploring your options.
3: If my spouse lost their job because of COVID-19, but I’m still employed, do we still qualify for mortgage forbearance?
The answer to this question depends almost entirely on your respective incomes and your household’s financial health.
The best source for answers here will be your financial advisor and your mortgage service provider.
4: Do I need to provide any documentation of my financial hardship?
Current guidelines from the Department of Housing and Urban Development state that, “No documentation is required to prove financial hardship due to the COVID-19 National Emergency. Mortgagees must offer borrowers experiencing financial hardship due, directly or indirectly, to the COVID-19 National Emergency a COVID-19 Forbearance upon borrower request.”
Typically, when it comes to requests for extensions, deferrals, and forbearance requests, the conventional wisdom would be that it’s a good idea to document as much as possible in any situation. For your own records, keep track of any documentation of income, at a minimum.
5: What exactly do I have to say to get the benefits I need?
Be direct. State that you are calling for assistance because of a change in your employment situation due to the COVID-19 pandemic. The exact words are up to you, but we recommend communicating clearly and quickly as your situation changes.
6: How long does the forbearance period last?
The answer to this question will depend on your mortgage lender. For many mortgages, this period will be between three and 12 months. If your financial circumstances do not improve over that period, it may be possible to apply for an additional period of time.
7: What happens at the end of a period of mortgage forbearance or deferral?
This is a great question to ask before signing up for mortgage forbearance or deferment, as some plans will require that you pay the sum of missed payments in full at the end of the period of forbearance.
If you’re concerned that you may owe a lump sum of money at the end of this period:
- Ask lots of questions before agreeing to any changes to your mortgage payment plan.
- Review any revisions to your plan in writing before signing any agreements.
- If you are concerned that you will not be able to meet the terms of your repayment, express this to your mortgage loan servicer directly.
- Ask if there are other options available to you.
8: Are the mortgage deferral or repayment options different if it’s a mortgage for my house, my business, or a commercial rental property that I own?
The CARES Act includes loan relief for small business owners, which may provide an alternative to altering your mortgage repayment schedule.
9: Are there any resources I can check for other sources of mortgage loan relief?
There are many resources available to homeowners seeking mortgage relief. Here are just four ideas you might suggest:
- Check with your state and local resources to see if there are other programs available to you.
- Ask your bank if there are any other loans or programs that you might qualify for.
- Check out HUD’s primer on COVID-19 Homeowner Help.
- Visit the National Association of Realtors’ COVID-19 hub for additional resources.
10: What will happen if I’m unable to make my mortgage payments?
This is the question many homeowners may be most afraid to ask. The good news is that the CARE Act includes a 60-day foreclosure moratorium starting on March 18, 2020 for all federally-backed mortgage loans.
This means that these borrowers will not see foreclosure actions and cannot be removed from their homes due to foreclosure during that period. Many state and local governments have added similar or even longer bans on eviction in their jurisdictions.
The best way to avoid foreclosure is to talk to your lender as soon as possible and communicate clearly about your ability to keep up with your current payment plan.
Empathy and Clear Communication Is Key During This Difficult Time
Customers should talk to their mortgage service providers about their programs and options, but they must feel comfortable putting their trust in your service representatives’ hands before they pick up the phone. To provide customers with the education they need, encourage your team to put themselves in the customer’s shoes. Consider their perspective and where each customer was in their financial life story before this hardship landed on their doorstep.
It’s worth noting that your loan officers may also be feeling overwhelmed in this moment of high demand. To help ease their burden and proactively provide borrowers with appropriate resources and help customers find the answers they need, consider setting up a drip campaign or a new customer journey to ensure your customer communications meet the challenge of the current moment.
With empathy and information, your team will be well-positioned to anticipate borrowers’ needs before they call and provide the resources they’re looking for in this challenging moment.