COVID-19 — 3 Things You Need To Know If You're Facing Financial Hardship
As the COVID-19 pandemic continues to slowly spread across the world, the economic impact is already being felt by millions of working Americans. Due to social-distancing advice from the CDC, many businesses have been forced to close their doors and furlough workers, resulting in a record number of Americans having to file for unemployment benefits.
In fact, the impact on the economy has already been so significant that, over the last two weeks alone, almost 10 million jobless claims were announced — dwarfing the previous high of 695,000 jobless claims that were filed in October 1982.
Due to the unprecedented financial turmoil that millions of U.S. workers are facing, there’s much concern about how homeowners will make their mortgage and other loan repayments. If you're one of the people who has been affected by the changing economy, don't panic — many banks are making accommodations to ease the financial burden on borrowers.
Government-sponsored mortgage programs Fannie Mae and Freddie Mac have asked lenders to suspend or reduce mortgage payments for up to 12 months for homeowners who are struggling to make their repayments.
In addition, Freddie Mac and Fannie Mae are also halting foreclosures and evictions until at least May 17, 2020, with any delinquent payments not being reported to the credit bureaus.
But don't fret if your home loan isn't a Fannie Mae or Freddie Mac, as many more lenders are working on updated policies that give borrowers flexibility in these uncertain times.
If you're facing financial hardship, or have recently lost your job due to the COVID-19 pandemic, here are a few things you need to know about making your loan and credit payments.
Mortgage Modification May Be An Option
Mortgage modifications are a useful option for any homeowner who finds themself in an expected financial crisis. Although the specific modification varies between lenders, typically the lender will allow the borrowers to skip mortgage payments for a set amount of time, and then begin repayment over the course of several months. Alternatively, some lenders offer homeowners reprieve by adding the missed payments to the end of the mortgage.
Ask For a Payment Deferral
Many lenders understand that their customers are facing uncertain times and hardships, so it's crucial to contact them immediately if you're unable to make your loan or credit repayments. The sooner you inform your lender of your financial situation, the sooner you can find a solution that's less likely to adversely affect your credit.
Several of the largest banks are currently offering flexible ways to relieve the burden on borrowers. For example, PNC bank is enabling borrowers to postpone their credit payments for up to 90 days, while also incurring no late fees. This postponement applies to all qualifying customers who have an auto loan, mortgage, credit cards, and other financial products. Bank of America has also recently announced that its customers can submit a request to postpone their credit card payments online.
Speak To Your Creditors and Lender
All financial institutions are responding to the COVID-19 pandemic differently, so it's important to discuss your options with them directly, to find out how they can help you.
Here is a list of what some of the major banks are offering their customers in response to COVID-19:
Chase Bank is offering to review your home loan and find out if you may be eligible for a revised repayment plan, loan modification, or forbearance or your mortgage.
Bank of America is putting a pause on all evictions, repossessions, and foreclosure sales. They are also actively working with customers to find other solutions to their financial hardships.
Wells Fargo has put a forbearance plan in place for customers who cannot make their mortgage payments, and are encouraging customers to reach out to them directly and discuss their options.
If you've recently become unemployed or are facing financial hardship due to the COVID-19 pandemic, it's crucial to remember that there is help available. Each bank and business has varying requirements for their relief programs, so it’s crucial that you reach out to your creditors immediately to find out what your options are.
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All information and materials in this article are for educational purposes only. Opinions expressed in this article are based on information considered reliable, but The Daily Money Show cannot guarantee the accuracy of the information nor should it be relied upon. The information discussed in this article should not be used as a recommendation to buy or sell securities nor should it be taken as investment advice. The Daily Money Show is not a Registered Investment Advisor or Broker Dealer. The Daily Money Show is not an accounting firm and does not give tax advice regarding any security or real estate transaction. You may want to consult with an accountant, attorney, real estate agent or financial advisor before proceeding with any transaction regarding securities or real estate.