Lending through the coronavirus pandemic
Friday, June 19, 2020
COVID-19 has caused a lot of misinformation to circulate concerning loans and other financial aspects. Cutting through this noise has been increasingly difficult as more and more sources publish information about government loan opportunities and other lending opportunities amid the crisis.
This complex financial climate can confuse anyone. There are many questions about mortgages, consumer lending, small business loans, and so much more during these uncertain times. Here are some of the most common questions we’re hearing about lending and mortgages.
Does Forbearance Defer My Mortgage Payments?
Mortgage forbearance is one of several options being offered to help Americans suffering as a result of pandemic control measures. Forbearance is a special agreement between the lender and the borrower to delay a foreclosure. The literal meaning of forbearance is “holding back.”
Forbearance is not a deferment on your payments. Terms can vary, and borrowers should make sure they understand what their loan servicers will require. Some servicers are offering to tack deferred payment amounts on to the total loan balance, while others are requiring deferred payments to be made in a structured plan at the end of the forbearance period.
Can I Buy or Sell A Home Right Now?
Yes, real estate has been categorized as an essential service, and that means that home sellers and buyers can continue to take advantage of above-average returns and low-interest rates.
Keep in mind though, with many third parties involved, from appraisers to title companies, the time frame to close is taking longer than the typical 30-45 days. Borrowers are also being asked to do tasks twice, like resubmitting a pay stub 15 days prior instead of 45 days prior to COVID-19.
Interest rates are low for mortgages, but stricter guidelines are in place such as higher credit scores and non-conforming(traditional) loans aren’t as readily available.
If I Can’t Make My Mortgage Payments, Will My Home Be Foreclosed?
Fear of foreclosure is just one economic effect of the coronavirus outbreak. However, the government has taken measures to help mitigate the impact. The CARES Act, signed into law on March 27, provides 60 days of relief for homeowners facing foreclosure and being forced to relocate during the COVID-19 pandemic.
The relief is available to borrowers with mortgages of the following types:
- Section 184 or 184A mortgages
- Mortgages backed by Fannie Mae or Freddie Mac
How Will the Pandemic Affect My Credit?
One of the many things people may be worrying about is how the widespread financial hardships caused by the coronavirus outbreak will affect their credit. We know credit rating is the key to so many things we want and need.
Section 4021 of the CARES Act provides credit protection during COVID-19. This section of the bill, signed into law on March 27, amends the Fair Credit Reporting Act requirements regarding how creditors report information about consumers who have received a forbearance or some other accommodation for making payments.
Anyone suffering financially should contact any creditors (credit card issuer, auto loan holder, etc.) and alert them that they are struggling as a result of the interruption to the economy. Consumers should ask their creditors what their options are until the crisis lifts. CARES Act Section 4021 does not require that creditors make any accommodations for consumers, but if they do, they can report the account as current if the consumer is making payments and no longer delinquent.
Is It Too Late to Apply for the Paycheck Protection Program?
The Paycheck Protection Program was depleted and had stopped taking applications for small business loans. However, as of April 27, Small Business Administration (SMB) started accepting applications again. Keep in mind the demand is high, and funds could run out quickly.
What Loan Options Are There Other Than the Paycheck Protection Program?
There are other government options besides the Paycheck Protection Program, such as Economic Injury Disaster Loan (EIDL), Traditional SBA 7(A) LOAN and SBA Express Bridge Loan. There are still conventional loans available and consumers may want to look at local credit unions who have more flexibility and less strict guidelines than banks.
Lending can be a complex process. Helping clients understand their lending options is a lending professional’s main objective. If you’re experiencing hardships as a result of the global pandemic, stay informed and consult with a lending professional to walk you through your options and cut through the noise.
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