You may have heard that one of the provisions of the CARES Act, is that there is currently a moratorium on foreclosures of federal loans, and in fact, upon request, you can request that all payments stop for six months, and then request another six month extension. What happens then has been a mixed bag of results – at first, it was just a deferral with a lump sum in six months, which isn’t too helpful. They are now saying that the payments will be added to the bank end of the mortgage. Still not clear to me if the mortgage company fronts the escrowed taxes & insurance, and carries that as a negative escrow for many years. Most likely, the taxes & insurance will be reanalyzed after a year or so, and your payments will likely increase by 10-25% for the following year.

The first thing to do, is to find out if your mortgage is a federal loan. Even though the name of your mortgage company that you pay may be a private bank, they are likely just the servicer, and the note may be held by Fannie Mae or Freddie Mac. You can click on their look up tools so you can verify that. Of course, VA loans and USDA first -time homebuyer’s assistance, 203 fix up loans, are included as well. And many private lenders are following the lead. The dirty truth is, banks don’t want your house, and as long as you work with them, including sending them things three times, you should eventually get some relief.

I don’t recommend applying for mortgage relief, unless you really need it. In fact, you’re only supposed to request it if you are financially affected by the pandemic. Not only is it a good amount of work to get it, but ultimately, the accounting will be messed up and confusing. And even though no payments are due, interest still accrues. Many people that I have seen forget that they permitted a second mortgage with no payments, just a balloon, against their house. There have also been reports of people simply inquiring about a loan modification, then being given one. I’d have to imagine that was either a confused consumer, or confused representative in customer service department.