Getting help
Homeowners will have to be proactive to get relief on their mortgages during and after the coronavirus pandemic. Review file photo 

In contrast to the relative uniformity that renters can expect from Gov. Gavin Newsom’s statewide eviction moratorium order, the state’s mortgage relief program — which boasts nearly 400 participating banks and credit unions — leaves it to California homeowners to proactively seek mortgage relief themselves. Lenders offer a variety of packages.

Newsom originally secured forbearance agreements from four of the five largest nationally chartered banks — Citigroup, JP Morgan Chase, US Bank, and Wells Fargo — as well as around 200 state-chartered banks and credit unions. The number of participating institutions nearly doubled over the next week, bringing the total to nearly 400 as of April 4. California homeowners whose loans are serviced by these institutions can skip mortgage payments for 90 days and are protected from foreclosure for 60.

This announcement comes amid dire straits for the state and national economies. Scores of businesses have been forced to shutter their doors and lay off employees as public life has ground to a halt.

“We just passed the one million mark,” Newsom said in his March 25 press conference, referring to unemployment claims in the state since March 13. This milestone coincides with record-high filings across the country, with 6.6 million first-time claims nationwide in the week ending Mar. 28.

“When we talk about unemployment insurance, we talk about a $600 increase beyond what states are already providing on a weekly basis for the next four months. That doesn’t mean much when you are facing the burden and the costs associated with, for example, your mortgage,” Newsom said. “Residential mortgages (are) top of mind, I imagine, for families all across not only this state but across the country.”

Everyone whose loans are serviced by a participating institution is eligible for relief regardless of their financial situation, Newsom said. Those whose lenders are not on the list should work directly with their bank or credit union to determine what options are available — and the state welcomes more participants.

But eligibility is contingent on submitting “some form of documentation” demonstrating hardship resulting directly from the pandemic. Hardship could range from contracting the virus to suffering lost income as a result of unemployment or reduced hours. While the governor’s office is working to minimize necessary documentation, it remains unclear what banks and credit unions — which have pledged streamlined processes — will require.

This does not mean that borrowers can simply ignore payments. If they do, those payments will likely be considered delinquent. People looking for mortgage relief must proactively request forbearance from their lenders before their payment deadline, officials and industry experts have emphasized.

Forbearance is not forgiveness. Rather, homeowners who have been directly affected by COVID-19 have a 90-day grace period to defer loan payments. Some lenders will expect payments at the end of these three months, which could be extended depending on the trajectory of the pandemic, while others will tack the sum on to the end of the mortgage.

21 Century broker Steven Hyman, who writes a regular real estate column for the Review, said that the “devil’s in the details” when it comes to repayment schemes. Homeowners should be clear about whether they will owe all deferred payments at the end of the forbearance period, Hyman said, as such an arrangement could prove a major hurdle for those who have lost jobs or substantial portions of their income amid the novel coronavirus outbreak. Ocean Blue Real Estate Founder David Oliphant echoed these concerns.

“At day 91, most lenders are still expecting those three (monthly) payments,” Oliphant said. “That’s probably not achievable for most people.”

To avoid this problem, Oliphant recommended that borrowers request an extension of the mortgage term by three months, which would give them more latitude in fulfilling skipped payments. People should also ask whether their lenders will forgive or compound interest throughout the forbearance period, he said.

When it comes to credit scores, Oliphant noted, state policies offer more protection. Lenders that signed onto Newsom’s program have agreed not to report derogatory information — which includes late payments — to credit reporting agencies. Lenders may report forbearances, which do not typically hurt credit scores on their own, according to the state’s financial relief website.

But Hyman warned that what banks say about delinquency reporting is often different than what they do. While California’s program should protect credit scores, individual borrowers should clarify the terms with their mortgage servicer to ensure that deferred payments will not be marked as late, he said.

As of now, relief is only available for residential mortgages, although the state is urging financial institutions to work with business owners to curb the effects of a looming economic recession. In both the residential and commercial realms, Newsom’s main goal is to get financial institutions on the same page.

“It is significant that we have some consistency, that we don’t have a patchwork (from) one bank to another,” Newsom said. “We wanted to engage our nation’s largest banks and see if we could create some continuity, some consistency across their ranks.”

Newsom noted several times that the Bank of America declined to participate in California’s program. As of now, Bank of America is working with customers on a monthly basis. Its current mortgage relief package defers loan payments for 30 days, and the bank has repeatedly stressed that it will continue the relief program for the duration of the crisis. Still, Newsom called on the bank to “do the right thing” and join over 200 other initial signatories in a 90-day deferral commitment.

In addition to Newsom’s relief program, many California homeowners are now protected by the Coronavirus Aid, Relief, and Economic Security Act, which President Trump signed into law on March 27. The federal government is offering two relief packages for those with federally backed loans: a 60-day foreclosure moratorium beginning March 18 and the right to request a 180-day forbearance beginning March 27, with the option to extend forbearance for another six months.

The policy does not apply to loans without federal backing, but the majority of homeowners can expect to benefit. According to the Consumer Financial Protection Bureau, federal entities Freddie Mae and Fannie Mac own or back nearly half of the nation’s mortgages. The National Housing Law Project reports that the number rises to 70 percent when including other federal agencies: the Federal Housing Administration and Departments of Housing and Urban Development, Agriculture and Veterans Affairs.

As is the case with the state program, borrowers do not need to prove financial hardship to qualify for federal relief, but do need to show that COVID-19 directly impacted their ability to pay. In response to concerns from some mortgage industry leaders that this would create an environment for fraud, a spokesperson for the Federal Housing Finance Agency told CNBC that borrowers will have to provide documentation for repayment plans. Those with loans owned by Freddie Mae and Fannie Mac — both overseen by the FHFA — will repay missed bills at the end of their mortgages.

Some financial institutions that are participating in California’s program — San Mateo Credit Union, for example — service federally owned loans in addition to their own, so homeowners should use online lookup tools to determine whether they qualify for federal relief. Mortgage servicers are required to report this information upon request, but given that banks are inundated with calls right now, online searches will likely yield faster answers.

Call log backups have posed significant challenges to those with imminent payment deadlines. Officials have consistently urged borrowers to contact their lenders immediately to make arrangements, but it can take hours to reach a real person on the phone, and an answer can take weeks, the Wall Street Journal reports.

The four national banks participating in California’s relief program have all reported a deluge of calls from concerned customers. Many mortgage payments are due at the beginning of the month and are considered late after the 15th, creating a worrisome timeline for borrowers seeking immediate assistance.

In signing on to Newsom’s relief package, bank CEOs predicted this backup.

“If every single person with a residential mortgage makes a phone call to their bank at the same time, those call centers will collapse,” Newsom said at his March 25 press conference. “The bank CEOs were quite candid with me about the concern around surge.”

Some banks, like Bank of America, are offering online forbearance request services. NHPL recommends taking advantage of these services to avoid long call wait times and to generate an electronic record of any agreements between customers and their banks.

Mortgage relief packages apply only to homeowners — who made up around 71 percent of Half Moon Bay’s housing market in July 2018, according to Home for All San Mateo County. On March 24, the county issued an eviction moratorium that protects the region’s renters from COVID-19-related evictions through May 31, unless extended.

This move made San Mateo County a pioneer in eviction moratorium policy. While Newsom granted all California counties the authority to establish such policies in a Mar. 16 executive order, few took him up on the offer. As of March 25, only 50 of California’s 539 cities and counties had established some sort of eviction ban, according to a letter from 37 Democratic lawmakers urging the governor to issue stronger protections for renters, who comprise about 45 percent of the state population. Newsom followed suit on Mar. 27 with a statewide eviction moratorium established via executive order.

Correction: This version corrects the name of David Oliphant's business to Ocean Blue Real Estate. 

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