Several real estate and mortgage industry groups have proposed an assistance program to help borrowers who may struggle financially as a result of the COVID-19 coronavirus outbreak.
The Housing Policy Council and trade associations representing banks, servicers and mortgage bond investors have submitted their plan to federal agencies.
“We know many people have had their income disrupted and as leaders in the industry, we all hope this disruption is temporary as we fight off the coronavirus,” said Ed DeMarco, president of the Housing Policy Council. “We want to give borrowers who need help, regardless of what type of loan, access to a simple, temporary payment deferment. I am pleased that so many people in the housing finance industry are working together to make sure needed assistance is in place for Americans experiencing economic challenges due to this national health emergency. We are all in this together.”
The plan is only designed for those who are currently facing an income disruption as a direct result of the coronavirus, not those who are able to meet their monthly mortgage payments.
For those with pending mortgage applications, the group is working on solutions to mitigate the disruption to workplaces caused by the virus crisis.
With a plan using natural disaster policies as a model, the highlights include:
- Homeowners affected by illness, quarantine, or who have experienced a reduction or elimination of income due to the national response to the pandemic may request assistance from their mortgage servicer.
- Customer contact with the servicer would include the use of online web-based portals, emails, or other electronic means, rather than solely by telephone, to address staffing constraints caused by the broad-based shut-down.
- Servicers would provide an initial 90-day payment forbearance, with potential to extend up to 12 months.
- Payment forbearance protections include no negative credit reporting, and no collection calls or letters, and no late fees.
- Payment forbearance is available to all affected borrowers, including those delinquent prior to the March 13 declaration date.
- The proposal ensures broad access nationwide, given the scope of affected population and constrained resources at financial institutions.
- Among the policy recommendations is elimination or streamlining of documentation requirements, in recognition of the limited ability to compile and/or contact third-parties for access to documents in this widespread event.
- The program is a deferral of mortgage payments, not a forgiveness. In most cases, missed payments would be made at the end of the life of the loan and there would be no interest accrued on the deferred amount.
- The approach is intended to provide customers with as much certainty as possible, by providing clarity regarding the mortgage payment “end-state,” for both short- and long-term forbearance.
More market update: