The effects of the COVID vaccine are finally starting to reach mainstream America. Over 100 million U.S. residents have received the vaccine, and it looks like herd immunity (considered to be the marker for a normal return from the pandemic) may be reached by the end of summer. The opportunity to get back to jobs that have been practically wiped out, including restaurant workers, entertainment providers, and travel professionals is good news for all Americans.
Just like workers, homeowners are trying to find their way out of pandemic woes. Last spring, the federal government provided financial assistance to homeowners through home loan and rental housing financing, but many are continuing to struggle. As maxHOA wrote about last week, millions of U.S. homeowners remain in active forbearance. Those year-long forbearance plans are about to expire for many, and those that have not recovered financially will be looking for help.
The COVID relief bill recently passed by the legislature and signed by the President provides one option. The bill includes nearly 10 billion dollars for struggling homeowners. This money has been earmarked to help homeowners make their mortgage payments and pay other home-related bills. If you qualify, you can apply for money to go towards mortgages, taxes, utilities, and yes, HOA dues.
Do I qualify for homeowner aid under the COVID relief law?
According to the National Council of State Housing Agencies, each state will receive a chunk of the billions set aside for homeowners in proportion to unemployment and forbearance rates. State agencies will be responsible for disbursing the money to homeowners that qualify. You may qualify if you own your home and have a loan with a principal balance at or below the federally-mandated loan limit. Most places in the U.S. follow a loan limit of $548,250. You have a better chance of qualifying if your income doesn’t exceed the national median income (or local median income if that is higher). More than half of the money set aside for homeowners will go to homeowners with lower incomes.
Unfortunately, the approval process will likely take time. State and federal housing agencies are simply overwhelmed by the number of housing relief programs they must administer. The amount of money going into housing from the relief package is the largest in U.S. history, but reports indicate that funds probably won’t get to homeowners until early 2022. The good news is that states have some experience in supplying federal funds to homeowners. After the Great Recession hit in 2008, the federal government included homeowner support in its relief bill. The process this time, though much bigger in scale, will operate in the same fashion. Hopefully, states will have learned from prior experience. Relief for homeowners is coming, but it may not be immediate.
If I don’t qualify, what else can I do?
If you are struggling but unable to get assistance through the COVID relief fund, there may be other options. Mortgage companies that manage home loans will likely be willing to work with you, particularly if you have a federally backed loan. (Almost three out of four homeowners have a federally backed loan.) Mortgage companies may be able to help you start or extend your forbearance. The federal government has extended the enrollment window for forbearance until June 20, 2021.
A forbearance is an option that allows you to get help through tough financial times in a few different ways. First, if you are able to pay your monthly mortgage, you may be able to negotiate a lower monthly payment for the forbearance period. If not, you may be able to have your mortgage payments postponed entirely. When the forbearance period ends, there are different repayment options. If you are able, you can typically pay back the balance in one chunk (reinstatement) or in additional payments each month (repayment plan). If not, you may be able to defer the payments and tack them on to the end of the loan, and typically, interest is not charged on the deferred amounts.
Another option for struggling homeowners is refinancing or loan modification. Mortgage rates dropped dramatically during the pandemic and remain low. Refinancing can save homeowners hundreds of dollars on their monthly payment. The catch? You will need to pay the upfront costs of closing, which run typically between 2-5%. It’s a good chunk of change, and many homeowners may be unable to pay for closing costs.
The Department of Housing and Urban Development
If none of these options are available to you, there is still another place to turn. The Department of Housing and Urban Development (HUD) received significant funds from the government to help homeowners during the pandemic. Reach out to HUD, particularly if your mortgage is not federally backed. Congress allocated $100 million to housing agencies, so you may be able to get assistance.
Where can I go for more help?
Fannie Mae, one of the U.S.’s leading lenders and finance companies, created an online portal to help homeowners explore their forbearance options. Check out KnowYourOptions.com for more information.