Jerry on Law
I wrote a blog on March 25, 2020 titled Maryland Stops Foreclosures and Evictions, due to Covid-19. The topic of that blog was, should you take any proactive steps if you fear that you will not be able to meet your mortgage payments? For many, the question of what to do if you Maryland mortgage was due and you were looking for options. My answer was to wait a week, and I would follow-up. My answer has now changed with regard to federally backed mortgages. See Should I Agree to a Forbearance Agreement, click here. See also, No Lump Sum at the End of Forbearance by clicking here.
Your Maryland mortgage was due and you can’t pay your mortgage.
Since the March blog, Congress passed, and the President signed, the CARES ACT. The CARES ACT is not a document that anyone can easily understand. Since the March blog there are options if your Maryland mortgage was due and you cannot pay mortgage because of the Covid-19 virus. You do have options if your loan is federally backed.
In March, I searched the following topic “are banks offering any help with Covid-19” Click here to search for yourself. Here are two articles that I originally found.
- Bankrate.com “List of banks offering help to customers impacted by the coronavirus”
- American Bankers Association America’s Banks Are Here to Help: The Industry Responds to the Coronavirus
The American Bankers Association article stated:
Bank actions to assist customers vary by institution and depend on a customer’s individual circumstances. They include but are not limited to fee waivers; deferred payments for credit cards, auto loans and mortgages; loan modifications; low-rate and zero-rate loans and other accommodations.
My take on this is:
- There are no guarantees, nor can there be;
- You will have to pay the bank back, but the question is when;
- The devil is in the details; and
- The banks have to mitigate their damages.
Here are my thoughts:
If you can pay your mortgage, then pay your mortgage. Do not play any games with the bank. The bank lent you money, and you promised to pay. Do not play a game with a bank, because you will lose every time..
If you play a game with a bank, then you lose
If you cannot pay your mortgage, because of a Covid-19 decline in income, then you must look at alternative ways to handle the crisis. I do not like the thoughts of deferred payments because the devil is in the details. Let’s say your monthly payment is $2,500. You may be able to defer payment, but deferring three payment but on month four, you will owe $10,000. If you cannot repay the forbearance, the banks say that there is the possibility of a loan modification.
Let’s look at some history of bank promises.
This is not the first time that Maryland mortgage was due and you were looking for options to save your home. At the beginning of the 2008 Great Recession, lenders were telling people facing the prospect of foreclosure not to pay the mortgage. However, the MHA (Making Home Affordable) test was not whether you were behind in your mortgage. The MHA test was whether the “mortgage loan is delinquent, or default is reasonably foreseeable.” The homeowner did not have to be in default, only if the default was reasonably foreseeable.
The servicers were giving false information. The homeowner did not have to be in default. The homeowner had to show that a default was reasonably foreseeable
I was against forbearance when I wrote this article. There were two reasons. First, in 2008 lenders and servicers were not giving truthful information to people looking for help. They were telling their clients to get the adjustable rate fancy loans, pay them for a year, and then apply for a refinance for a fixed rate loan. The homeowners said yes, got their adjustable-rate loan that changed rates in six months to a year. The homeowners lost their homes when the adjusted payment went through the roof. What about the refinance that the lenders promised? If it was not a contract, it meant nothing. Refi’s are not automatic, neither are loan modifications.
The second reason when I originally wrote the was that if banks truly wanted to help the homeowner, the banks would defer the mortgage payments for whatever period was agreed and put the deferred payments on the back end of the loan. That is now the case for federally owned mortgages.
Since the original writing of this blog, the Federal Housing Finance Agency (FHFA) clarified when the forbearance for federally backed loans was due. You could put the missed payments to the back of the loan. You do not have to sign a forbearance agreement. You simply have to ask for the six month forbearance and supply an affidavit that stating that you income fell as a result of the Covid-19 Pandemic.
Click here for the blog on putting missed payments to the back of the loan.
Best and be safe, Jerry Solomon