Ways to renegotiate your housing bill
As the summer season carries on, #Coronavirus cases are rapidly climbing, and the economic impact is still overwhelmingly present. Coupled with the expiration of the $600 #unemployment bonus at the end of July, millions of Americans are struggling to pay their mortgages and rents. In July alone, 32% of Americans were unable to make their full rental or mortgage payments, marking the fourth month in a row that a new “record high” was reached for housing nonpayment.
Between March 27-July 24, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, protected tenants from
- Legal action to evict for nonpayment of rent (or other fees or charges)
- Fees, penalties, or other charges related to nonpayment
- Notices to vacate the property until July 25, 2020
But with these protections now expiring and no federal mandate currently in place, many tenants are left extremely vulnerable and worried as to how to make their housing payments.
We’ve pulled together helpful tips on how to best communicate with your landlord if you are in fear of missing rent and how to stretch your budget further during this difficult time.
What do I do if I know I am unable to make my housing payment?
If you are a renter
First, it is best to communicate with your landlord as soon as possible—ideally, well before your rent or mortgage is due. Do not wait until the due date as many states require documentation well-ahead of the first of the month.
- Many state and local governments have stopped evictions because of the coronavirus pandemic (independent of the CARES Act). The details of how renters are protected, and for how long, will vary based on where you live
- Visit the Eviction Lab’s list of state and local eviction and foreclosure limits to find out if your state or local community has eviction protections during this time
Be direct and transparent with them. Often, landlords are understanding as long as you are honest about your current hardship. It's generally more beneficial for them to keep you as a tenant, rather than fill a vacancy.
Share documentation that provides reasoning for your financial hardship or situation.
- Ex. Letter of termination, a note from your employer showing a reduction in hours or pay, or an unemployment insurance application
- Be realistic with the amount of reduction or increase in time (to pay rent) you are asking for. If your overall household income has decreased by 30%, ask for a 30% reduction in rent. This consistency can help avoid further falling behind and also shows that you are trying to be fair to your landlord
Ask what options they'd be open to. Options may include rent-deferment, payment installments, or even reduced rent for a period of time.
If you can come to an agreement, make sure to get it in writing. Read it carefully before signing and keep a copy for your records.
If you cannot make rent because you lost income due to COVID-19 and need to tell your landlord, click here for an email or letter template that you are welcome to fill out to start the conversation.
If you are a homeowner
If you have a bank or private mortgage lender, call immediately to ask about your options to delay payments. Payment assistant options can include a repayment plan, forbearance, or a mortgage modification and typically last for 3 months.
Repayment Plans: These allow you to catch up on payments by paying the regular monthly payments plus an extra amount each month. The loan has a new, higher monthly payment that includes a portion of the balance due for a set period of time.
Forbearance: With forbearance you either won’t have to make payments or your payment will be reduced for a designated period of time, allowing you time to improve or stabilize your financial situation. It’s important to consider though, that a lump sum equal to the amount of the missed payments will be due at the end of the forbearance period and will be considered past due until it is brought current.
Mortgage Modification: This option can permanently change the terms of the loan to bring the account current and may include a lower monthly payment or lower interest rate. A mortgage modification will bring the account current and may reduce the monthly payments if you have a long-term financial issue.
If you have a government backed mortgage
If you have a federally-backed or government-sponsored enterprise (GSE) loan: Fannie Mae or Freddie Mac, homeowners have protection put in place by the CARES Act. Under this law:
Your lender or loan servicer may not foreclose on you until August 31, 2020, at the earliest
If you experience financial hardship due to the #Coronavirus pandemic, you have a right to request and obtain:*
- Forbearance for up to 180 days
- An extension for up to another 180 days (for a total of up to 360 days).
*You must contact your loan servicer to request this forbearance. There will be no additional fees, penalties or additional interest, beyond scheduled amounts, added to your account. You do not need to submit additional documentation to qualify other than your claim to have a pandemic-related financial hardship.
With any lender, you will be required to share documentation that validates or supports your financial hardship or situation like a letter of termination, a note from your employer, or an unemployment insurance application. Always check that you have received the documentation and be sure a copy of the documents and records for any changes to your mortgage.
For full information about tenant protections in your state during COVID-19, visit this website.
What are your thoughts on housing during the pandemic? Share in the comments below.
Thank you for this information. How soon should you contact the mortgage holder? As soon as you lose your job or when the severance period is running out? Are there any similar suggestions for other creditors, car loans, credit cards, etc.?
In terms of timing David, I suggest you notify your mortgage lender as soon as you know your income will be changing (so in your example, when you lose your job). That allows you and the bank more time to work out an agreement. You can apply the same logic to a car loan or any other bank loan in terms of communication and asking for adjustments.
Credit cards are different though because the terms on non-collateralized revolving credit tend to be trickier and very honestly, less consumer-friendly. While you can and should ask for your interest rate to be lowered (if you have good credit) or your payment date to change (to a different day of the month) credit card companies generally will not restructure your debt. Please know that many credit card companies can use a reduction in your income to INCREASE your interest rate. Hope that helps!