If you are losing income due to the coronavirus crisis, lenders may allow you to make partial or no payments for up to a year. The director of the Federal Housing Finance Agency, Mark Calabria, explains.
LULU GARCIA-NAVARRO, HTE:
Now, there is encouraging news for homeowners, who make up almost 65% of households in this country. If you are losing income because of this crisis, the federal government says lenders should allow you to make partial payments or even no payments on your residential mortgage for up to one year.
We are now joined by Mark Calabria. He was the one who gave this directive last week, and he heads the Federal Housing Finance Agency.
Welcome to the program.
MARK CALABRIA: Hello.
GARCIA-NAVARRO: Hello. And Chris Arnold is with us too. It covers the housing market for NPR.
CHRIS ARNOLD, BYLINE: Hi, Lulu.
GARCIA-NAVARRO: Okay. We’re both going to ask questions. Mike – Mark Calabria, it’s probably good news for a lot of homeowners right now that up to a year of their mortgage could be canceled. In one sentence, why did you do it?
CALABRIA: Well, we thought it was essential that we could give a little comfort and let people know what the situation is and we certainly wanted this time – to reduce stress. We all experience stress in various ways, and the last thing you should have to worry about is losing your home right now.
GARCIA-NAVARRO: Give us some details. What exactly did you say to the banks and other companies that handle mortgages here?
CALABRIA: So let me talk about two different types of borrowers. Let’s talk about the first type of borrower who is directly impacted. And when I say directly impacted, it is not necessarily that you or a member of your family fell ill. But if you lost your job because your employer – or even if you had a drop in income or if, you know, your spouse lost their job but you didn’t lose yours, you would lead – you would contact the lender you deal with each month – your maintenance worker – and they would try to come up with a plan.
So, for example, if your spouse has lost their job and you don’t, you know, you might have to pay half the mortgage payment. If you’ve lost your job completely, they may be able to reduce you to zero mortgage payments. I want to point out that this is all forbearance meaning it would eventually be added to the rest of the mortgage. So it’s a dead time.
GARCIA-NAVARRO: You have to pay it back.
CALABRIA: Exactly. And so it is for borrowers who have a direct impact. As we also know, these were families who would have already faced enough lockdown for issues unrelated to the virus. And partly to deal with their difficulties but also the public health problem – because you can imagine that we do not want to put families on the streets and be exposed to the virus. We don’t want to have, you know, say, the sheriff’s department come in and deal with foreclosures the same way.
So for families who were facing an already existing foreclosure before the crisis – and most of them are families where you already have a year or two after the last payment – there’s a 60-day moratorium on everything. type of lock related to this.
CALABRIA: And if it continues beyond these 60 days, which goes until May 17, then we will extend it. But again, like everyone else, we’re trying to figure out how long this will last.
ARNOLD: And one question I have, Mark, is so technically it applies to about half of the mortgages in the country because you control Fannie Mae and Freddie Mac, and they guarantee those loans. But for the other half – we’re talking millions of other mortgages – you’d expect the rest of the industry to follow suit and do something very similar.
CALABRIA: Yes. The same day we announced this, HUD, which manages the FHA, which represents a very large part of the mortgage market, announced that it would institute similar procedures. I know of a number of major banks – Wells Fargo, Bank of America – many others have already announced. And so we thought that one of the reasons we wanted to release something was that we thought that if we set certain parameters, then we could put in place standards that everyone could orient themselves to. And we really saw it. So I can’t say that one hundred percent of the mortgage market is covered right now, but I think it would be fair to say that over 90% of the mortgage market is covered right now.
GARCIA-NAVARRO: One question, though – if lenders don’t, can you or other regulators force them to?
CALABRIA: We can in terms of regulator – the lenders with whom we do business. So of course, no lender has the right to do business with Fannie and Freddie. If you don’t follow our guidelines, you’re not doing business. Lenders are therefore strongly encouraged to want to cooperate with Fannie and Freddie. And of course, at the end of the day, for the lender handling the loan, if they want to get paid at the end of the day, they’re going to cooperate.
They are therefore strongly encouraged to work with us on this subject. And so far we’ve only seen cooperation – I really want to stress that. We have also heard the same kinds of issues that everyone is facing. We have heard from lenders that their capacity is down by about 30%. Obviously, a large part of their staff works from home, teleworking …
GARCIA-NAVARRO: It means that people cannot pass; they have a hard time talking to their lenders.
CALABRIA: Absolutely. And so there are going to be bottlenecks, which is one of the reasons I would really like to urge listeners – if you don’t need immediate help, please don’t call because you will waste time and attention away from families who need help.
GARCIA-NAVARRO: Briefly, what are the requirements here? Do people need any documentation?
CALABRIA: So first of all, you can basically state your situation. You would say, I lost my job; I lost one hundred percent of my income. Over time, we want to make sure that if you get your job back, if you get UI, they’ll calculate that in – so over time we’ll have a new adjusted income payment.
But again, this is also important – keep in mind – because, as we talked about earlier, it will be tolerance. You will have to pay it back. But you’re really in a situation where if you can pay half, if you can pay third, you should try to go ahead and do it.
And I think before you talk to your maintenance worker, what you should do is write on a piece of paper, you know, what the drop in your income has been. Was it one hundred percent? Is it 50%? Calculate a payment. If you can tell, listen; I can do X, I think it will make the process a lot easier, a lot faster.
But again, at first it will be really – we’ll take your word for it. You are going to tell us how much you have suffered from. We will involve you. And over time, we’ll try to make sure people get a manageable payout. And obviously we want to get everyone back on their feet and make their normal payment ASAP.
ARNOLD: And when we get to this point where – OK. You know there are different types of repayment plans. And if all goes well – well, someone got their job back, and we want the economy to get back on track. If it is simply to extend the term of the loan, the payments remain the same. It seems, like, very manageable to people.
On the other hand, if some lenders do it in a way that would dramatically increase payments for people, that would be bad for that person and, you know, as an economist, bad for the economy. When we try to, you know, reload things and get going, we don’t want to put people on higher mortgage payments, do we? So, are there any rules for how this is going to work? – payment.
CALABRIA: So there are. So all charges, all interest charges – those are suspended. So it’s not like we’re charging you interest while it’s going to be delayed. And we want to work with the borrower. And of course, if there are borrowers who – let’s say it’s two months long and you’re 60 days late – two months of payment. If you’re in a position where you can pay off half of that or want to be able to add it or want to add it at the end where we just extend the term of the mortgage for another two months, there will be to be a variety of options on the table, and we want to be able to try and get borrowers back up to date as soon as possible.
And again, there may be circumstances where if the borrower chooses to add to their payment and say, you know, I was delayed for two months, but say what – why don’t you add you not yet $ 50, hundred dollars to my payment in the future? – You know, that will be an option. But it must be something that the borrower must be a part of.
GARCIA-NAVARRO: Very briefly, we talked about the owners. But of course, millions of people in this country are renting out their homes or apartments. What to do for tenants?
CALABRIA: So for starters, our break and tolerance apply to properties where the owner can ask for help as well. So let’s start with about a third of renters living in single family units, which of course includes townhouses, townhouses. So if you’re having trouble paying your rent, talk to your landlord first. If your landlord can call the lender and have a Fannie and Freddie loan and say okay I can’t do the mortgage because I can’t collect the rent from my tenant then the landlord can get forbearance . And of course part of that deal would be for them to pass forbearance to the tenant.
CALABRIA: Same here – the owner would have to reinvent. So part of that is trying to work with your landlord. I also notice, I think most people know this – just over 10% of rental housing is either social housing or vouchers or some kind of government aid.
CALABRIA: And HUD is working to make sure these families are taken care of.
GARCIA-NAVARRO: Mark Calabria, thank you very much.
CALABRIA: Absolutely. My pleasure.
GARCIA-NAVARRO: He is director of the Federal Housing Finance Agency.
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