Minnesota homeowners, loan servicers navigate details of mortgage relief

Richard Anderson, a self-employed entertainment agent in Rockford, watched his contracts disappear and his income evaporate when the state's stay-at-home order was implemented in late March.

So he was grateful when his mortgage company offered to let him skip three payments. Stress returned when a letter arrived saying all skipped payments must be repaid "when the relief period ends."

"I called and said 'How does that help if we don't' know if this will be over by then?' " he said.

This week Anderson is a lot less stressed about his prospects for a break on those mortgage payments. On Monday Freddie Mac, Fannie Mae and the agency that oversees them all issued statements that said borrowers will not be required to make lump-sum payments once their forbearance period ends.

Those announcements were aimed at relieving confusion, and some say misinformation, about the obligations of homeowners who sign up for the federal relief program. Freddie Mac's CEO David Brickman said in a statement that mortgage servicers are obligated to work with borrowers to find the best option.

"Simply put, if you are a homeowner seeking forbearance, and Freddie Mac owns your loan, you are never required to make up missed payments in a lump sum. Our policies offer a number of options to bring borrowers current."

Those options include a repayment plan that enables borrowers to repay the missed payments month over month; deferral that allows them to tack the payments to the end of their loan term or a loan modification that will change the terms of their mortgage. Freddie Mac said that 30 days before the end of the forbearance period servicers will be in contact with borrowers to make a repayment plan.

For Anderson and others, the announcements help clarify their obligations at a time when uncertainty and skepticism over the program were intensifying. Since mid-March millions of Americans have applied for the mortgage forbearance program. Those affected financially by COVID-19 would be eligible for a six or 12-month break from their mortgage payments if they have a government-sponsored mortgage. (FHFA.gov has a lookup tool for those who want to verify that they have a Fannie or Freddie Mortgage).

Last week, the Mortgage Bankers Association said that nearly 7% of mortgage holders — or 3.5 million loans — had requested a forbearance as of April 19, and that figure keeps rising.

Julie Gugin, executive director of the MN Home Ownership Center, said COVID-related calls increased 30% to 50% during April. An increasing number of those calls, she said, are from borrowers who are concerned and confused about federal forbearance programs aimed at helping them. The center works with agencies across the state to provide resources and information about homeownership, but also helps those struggling to make their house payments.

"Interest in what the future will bring has picked up," she said. "We are encouraged by the fact that it feels like mortgage companies are more prepared to work with homeowners in advance than during the foreclosure crisis."

Anecdotally, she said, many private-mortgage companies are also offering loan modifications for people who are requesting forbearance, enabling them to add the payments to the end of the mortgage.

Gugin, who has been at the helm of the organization since 2007, said that while the current situation bears some resemblance to the 2008 downturn, she's hopeful it won't be a replay of the Great Recession. Consumers now have access to more financial resources by way of enhanced and expanded unemployment benefits aimed at replacing lost income. In addition, government agencies and lenders are being more proactive. Still, she anticipates a dramatic increase in the number of people who will fall behind on their mortgages while they await those benefits.

"Over a half million people filed for unemployment benefits," she said. "So there will be defaults, but the magnitude depends on how long this goes on and how long people remain unemployed and what happens with unemployment payments."

She advised people who are concerned about making their mortgage payment or that the terms of repayment won't be suitable, to immediately call their mortgage company, or the company that services that mortgage. And she said homeowners who are able should keep making their payments.

"Forbearance is not forgiveness and people need to act," she said. "Acting early is always important before you even are thinking about missing a payment."

Servicers of mortgages secured by the federal government have had to quickly adapt to the new federal CARES act, which aims to help people affected by COVID-19, and have been including information on their websites and notifying borrowers or their options.

Keosha Burns, vice president of public relations for Chase Home Lending, which services Anderson's mortgage, said the lender recently received additional repayment guidance from Fannie and Freddie.

"Chase will be staying in touch with our customers throughout this time and ensure they have the help they need. For loans owned by Fannie, Freddie or Chase, homeowners can move missed payments to the end of the mortgage term," she said. "We are encouraged that for most of the loans we service, customers will have the option to easily move missed payments to the end of the mortgage term, removing a lot of worry people have had."

For Anderson, the new directive helps provide some assurance that taking a break from his mortgage payments won't result in an even greater hardship in a few months. He said that with large gatherings likely banned for months, it could be several months before he and others in the music industry are hosting events again.

Like other self-employed workers, he's eligible for expanded unemployment and assistance programs, which he applied for immediately after his bookings ground to a halt. Although his online application said he wasn't eligible, he called the Minnesota Unemployment Benefits office and was assured that he had been approved. More than six weeks after applying, he has yet to receive any payments, even his $1,200 stimulus check.

While he has enough savings to pay the bills for a few months, he's already thinking about the long-term situation and how he will prioritize his payments. Though he has received assurance that his unemployment benefits will eventually be paid retroactively, he's still worried about his long-term financial prospects. After backing out of his initial plan to proceed with a three-month forbearance, the recent guidance is giving him the confidence to make another inquiry.

"I'm just living off whatever I had stashed and have had zero income since March 15," he said. "Who knows what's going to happen?"