COVID-19 Mortgage Relief: Your Options and Pros & Cons

Daniel Penzing
Written by
Last update:

Unable to pay your mortgage due to COVID-19? Read on to find out your options.

If your monthly payments are too much for you to handle, then you will want to consider applying for mortgage relief or a mortgage assistance program.

Mortgage relief can be sought in one of three ways “ loan mod (modifying your loan by lowering your monthly payments), loan forgiveness (waiving your loan balance), and declaring bankruptcy.

Before we discuss loan modification and loan forgiveness, let’s look at why declaring bankruptcy can be a feasible option for you.

Forbearance

Forbearance is one of the three options for mortgage relief we explored in the last chapter, and the one you are most likely to hear about. It is a uniquely designed option given the current economic environment, and with very strict regulations regarding how it can be used. Forbearance allows you to delay payments for up to 12 months, which is a great option if you are experiencing financial hardship. You are generally required to pay interest on forbearance loans.

The purpose of forbearance is to prevent a foreclosure that would occur if the homeowner stopped making mortgage payments. However, it will not save you from having a foreclosure on your credit report. If you are able to get a loan modification or work out a payment plan for your mortgage, the payments on loans taken out with forbearance will not count in your mortgage modification. So, in order to have your mortgage modified, you will need to start making payments on your current lender.

Some of the drawbacks of forbearance are:

{1}. You will need to pay interest on a forbearance loan.
{2}. You are responsible for paying any back payments accumulated on your mortgage since the last payment.
{3}. You still receive foreclosure paperwork after receiving a forbearance loan.
{4}. You need to contact your lender to find out whether your mortgage is eligible for forbearance, and if so, you need to apply.
{5}. The lender can deny your request for forbearance.

Pros

You may be a victim of the subprime lending boom that began in the late 1990s and didn’t fully subside until the 2008 financial crisis. Subprime loans were created to provide home financing to people with lower incomes and credit scores. But in some cases, subprime loans were issued to people who didn’t qualify based on lending criteria. Subprime mortgage loans were typically used as an alternative to subprime personal loans. However, with high interest rates often exceeding 20%, subprime mortgages were sometimes used as an alternative to traditional 30-year fixed-rate mortgages. This allowed some homeowners to purchase a home with a smaller initial down payment than a traditional mortgage. Before the 2008 financial crisis, homeowners might also use subprime mortgage loans to refinance an existing mortgage. But after the real estate crash and recession, many of these homeowners found themselves underwater on their mortgage – owing more than their homes were worth – and were forced to walk away and give up the home.

If your home fell into foreclosure after 2009, you may qualify for a COVID-19 loan. COVID is an acronym for subprime loan modifications. COVID-19 is a program created by the Federal Government to help eligible homeowners avoid foreclosure by lowering monthly mortgage payments.

Cons

While having confirmed Condonation of your Mortgage deal may provide you such relief, it does not mean that you are able to be relieved off other liabilities associated with the late payments. On the other hand, any late payment fees/penalty fees will be waived.

Condonation doesn’t guarantee that the fee amount will remain unchanged. You will be required to pay the amount decided on by the lender. The amount can however be lesser than the earlier one but cannot exceed the original sum of fee.

The best way to deal better with the anxiety of waiting for property loan conciliation is to mitigate the undesirable effects. To do so, make sure that you are having enough amount in the bank for the loan amount plus late payment fee. Also, you may have to consider obtaining a personal loan in order to cover the desired amount.

Such loans are easily available and can be obtained in few working days by way of a simple online or offline application. It is also a more suitable option if you are looking to move to a new property in a jiffy.

Deferment

Some of the common terms that come up when talking about student loan deferment include forbearance, capitalization, and deferment.

Deferment, one of the critical student loan relief options available, is not the same as forbearance.

In general, forbearance is used when you can’t make payments because of financial hardship, or if you are currently enrolled in school. During a period of forbearance, interest will continue to accrue on your loans, which will add to the balance. Forbearance usually applies to certain repayment options, including income-based repayment, in both cases. If you choose forbearance, be sure to submit a standard forbearance form to your loan provider and any applicable supporting documentation.

Deferment, while similar to forbearance, is different. It can last longer and does not require your repayment.

You could be eligible for deferment if you are a one-quarter or one-half time student or if you are working in a nonprofit field. This type of student loan relief can also apply if you are serving in the military or if you meet certain eligibility requirements in the public service loan forgiveness program.

Pros

You may be a victim of the subprime lending boom that began in the late 1990s and didn’t fully subside until the 2008 financial crisis. Subprime loans were created to provide home financing to people with lower incomes and credit scores. But in some cases, subprime loans were issued to people who didn’t qualify based on lending criteria. Subprime mortgage loans were typically used as an alternative to subprime personal loans. However, with high interest rates often exceeding 20%, subprime mortgages were sometimes used as an alternative to traditional 30-year fixed-rate mortgages. This allowed some homeowners to purchase a home with a smaller initial down payment than a traditional mortgage. Before the 2008 financial crisis, homeowners might also use subprime mortgage loans to refinance an existing mortgage. But after the real estate crash and recession, many of these homeowners found themselves underwater on their mortgage – owing more than their homes were worth – and were forced to walk away and give up the home.

If your home fell into foreclosure after 2009, you may qualify for a COVID-19 loan. COVID is an acronym for subprime loan modifications. COVID-19 is a program created by the Federal Government to help eligible homeowners avoid foreclosure by lowering monthly mortgage payments.

Cons

While having confirmed Condonation of your Mortgage deal may provide you such relief, it does not mean that you are able to be relieved off other liabilities associated with the late payments. On the other hand, any late payment fees/penalty fees will be waived.

Condonation doesn’t guarantee that the fee amount will remain unchanged. You will be required to pay the amount decided on by the lender. The amount can however be lesser than the earlier one but cannot exceed the original sum of fee.

The best way to deal better with the anxiety of waiting for property loan conciliation is to mitigate the undesirable effects. To do so, make sure that you are having enough amount in the bank for the loan amount plus late payment fee. Also, you may have to consider obtaining a personal loan in order to cover the desired amount.

Such loans are easily available and can be obtained in few working days by way of a simple online or offline application. It is also a more suitable option if you are looking to move to a new property in a jiffy.

Loan Modification

Fisher & Paykel Mod. Serv. Plan.. These are all lumped under different governmental agencies but are all similar in concept.

Here is a brief overview of the two..

Each are based on your income, age of the mortgage, and a few others.

Fannie Mae and Freddie Mac are set up to help people in foreclosure or those behind in their mortgage.

Why is that? Since they are part of the government and want to lower the numbers of foreclosures and those behind.

Who is qualified for this type of loan modification? People within financial distress or with limited income.

This usually means you are facing foreclosure.

You will also need to show they you undertook all reasonable action, sued for bankruptcy if that’s an option to you and had no late or missed payments on your mortgage within the past year.

People with a standard mortgage may also be eligible if they are facing financial hardship, but they will need to have experienced recent hardship. This can mean your employment circumstances are changing for the worse or that your mortgage has risen while your income level has not.

How can you get a loan modification from Covington Plan? You will fill out a loan modification form including all documentation of financial distress, mortgage and employment, and all other requests you may have.

Pros

You may be a victim of the subprime lending boom that began in the late 1990s and didn’t fully subside until the 2008 financial crisis. Subprime loans were created to provide home financing to people with lower incomes and credit scores. But in some cases, subprime loans were issued to people who didn’t qualify based on lending criteria. Subprime mortgage loans were typically used as an alternative to subprime personal loans. However, with high interest rates often exceeding 20%, subprime mortgages were sometimes used as an alternative to traditional 30-year fixed-rate mortgages. This allowed some homeowners to purchase a home with a smaller initial down payment than a traditional mortgage. Before the 2008 financial crisis, homeowners might also use subprime mortgage loans to refinance an existing mortgage. But after the real estate crash and recession, many of these homeowners found themselves underwater on their mortgage – owing more than their homes were worth – and were forced to walk away and give up the home.

If your home fell into foreclosure after 2009, you may qualify for a COVID-19 loan. COVID is an acronym for subprime loan modifications. COVID-19 is a program created by the Federal Government to help eligible homeowners avoid foreclosure by lowering monthly mortgage payments.

Cons

While having confirmed Condonation of your Mortgage deal may provide you such relief, it does not mean that you are able to be relieved off other liabilities associated with the late payments. On the other hand, any late payment fees/penalty fees will be waived.

Condonation doesn’t guarantee that the fee amount will remain unchanged. You will be required to pay the amount decided on by the lender. The amount can however be lesser than the earlier one but cannot exceed the original sum of fee.

The best way to deal better with the anxiety of waiting for property loan conciliation is to mitigate the undesirable effects. To do so, make sure that you are having enough amount in the bank for the loan amount plus late payment fee. Also, you may have to consider obtaining a personal loan in order to cover the desired amount.

Such loans are easily available and can be obtained in few working days by way of a simple online or offline application. It is also a more suitable option if you are looking to move to a new property in a jiffy.

Refinancing

Compared to private debts, student loan debt has been relatively easy to manage. The majority of student loan borrowers are able to separate those debts from other types of loans, and they can even get their student loans discharged if they become permanently disabled.

But there is still another benefit you can obtain. If you have a variable interest rate and current rates have dropped, you can refinance your federal student loans to lower your monthly payment. For many people, the easiest way to do this is to refinance your federal student loans to a new federal loan.

Pros

You may be a victim of the subprime lending boom that began in the late 1990s and didn’t fully subside until the 2008 financial crisis. Subprime loans were created to provide home financing to people with lower incomes and credit scores. But in some cases, subprime loans were issued to people who didn’t qualify based on lending criteria. Subprime mortgage loans were typically used as an alternative to subprime personal loans. However, with high interest rates often exceeding 20%, subprime mortgages were sometimes used as an alternative to traditional 30-year fixed-rate mortgages. This allowed some homeowners to purchase a home with a smaller initial down payment than a traditional mortgage. Before the 2008 financial crisis, homeowners might also use subprime mortgage loans to refinance an existing mortgage. But after the real estate crash and recession, many of these homeowners found themselves underwater on their mortgage – owing more than their homes were worth – and were forced to walk away and give up the home.

If your home fell into foreclosure after 2009, you may qualify for a COVID-19 loan. COVID is an acronym for subprime loan modifications. COVID-19 is a program created by the Federal Government to help eligible homeowners avoid foreclosure by lowering monthly mortgage payments.

Cons

While having confirmed Condonation of your Mortgage deal may provide you such relief, it does not mean that you are able to be relieved off other liabilities associated with the late payments. On the other hand, any late payment fees/penalty fees will be waived.

Condonation doesn’t guarantee that the fee amount will remain unchanged. You will be required to pay the amount decided on by the lender. The amount can however be lesser than the earlier one but cannot exceed the original sum of fee.

The best way to deal better with the anxiety of waiting for property loan conciliation is to mitigate the undesirable effects. To do so, make sure that you are having enough amount in the bank for the loan amount plus late payment fee. Also, you may have to consider obtaining a personal loan in order to cover the desired amount.

Such loans are easily available and can be obtained in few working days by way of a simple online or offline application. It is also a more suitable option if you are looking to move to a new property in a jiffy.

Steps Borrowers Facing COVID-19–related Hardships Should Take

“COVID-19” refers to the Code of Federal Regulations section that governs the procedures for applying for mortgage loan forgiveness in certain conditions. COVID-19 is available to eligible homeowners who have experienced specific life events that make it impossible to maintain the property or repay mortgage loans. Borrowers who meet requirements for COVID-19 relief may be able to have their mortgage mortgage discharged or modified.

Borrowers must prove financial hardship. In all cases, lending institutions will require borrowers to demonstrate financial hardships that make it impossible for borrowers to continue repayment of individual mortgage loans. Loan modification may be required. If conditions for COVID-19 relief can be met, the lending institution may choose to modify the original mortgage loan agreement in exchange for the discharge of the loan. Examples of hardship events that can garner the borrower COVID-19 mortgage relief include:

  • Death of a borrower or joint owner
  • Hospitalization of a borrower or joint owner
  • Military deployment of a borrower or joint owner
  • Divorce or separation
  • Foreclosure of a borrower’s primary residence
  • Property tax delinquency
  • Damage to the property
  • Unemployment of a borrower or joint owner
  • Inability to sell property
  • Injury or illness rendering a borrower or joint owner unable to work

Steps Real Estate Investors With Mortgages Should Take if Their Tenants Can't Pay rent

Different investors will have different opinions on how to deal with a tenant in default on their rent.

A majority of people will tell you that eviction is the only option if your tenant refuses or is unable to pay the rent. Most people would suggest that you should be prepared for that action and process the proper paperwork with the proper authorities.

Consequences of Evicting the Tenant

Even if you take these actions, they may not yet guarantee your recovery 100%. You still have to deal with the repercussions of the eviction.

If you proceed past foreclosure and the eviction, you will still have an empty unit with no income and no present or future value.

Timeframe that Eviction Takes

In most cases your eviction will take anywhere from 2-4 weeks from start to finish. Sometimes it is much quicker. There are cases where it takes longer.

What Options Are Available To You?

We recommend that you protect yourself and your investment from this scenario through your own insurance policy. There are also several other options.

Granting a New Lease

You can ask the tenant to sign a new lease and extend the term for another 5-10 years. The only reason to do this is if you don’t want to deal with eviction and recovery of your property.

Beware of Scammers

Con artists frequently specialize in certain types of scams. And a scam that’s particularly popular right now goes by the name of COVID-29 Mortgage Relief.

The idea is that you are able to quickly reduce your debt by filing a class action lawsuit. This sounds like a good deal for you. Because, surely, even if you don’t win, you’ll at least get back your filing fee … right? Wrong.

The name of the scam is a little tip off. COVID-29 Mortgage Relief is a scam, and you’d be throwing away your money if you’re tempted to play it.

Another tipoff to the COVID-19 Mortgage Relief scam is that you can file by yourself. Class action lawsuits are typically filed by a group of people with similar grievances. Or they’re filed by a business or an organization. COVID-29 Mortgage Relief is an individual scam, and that’s another tipoff.

Figure Out a Solution Before It's Too Late

If you're socked by a financial hardship and looking for ways to dig yourself and your family out it, there are programs that can help you. One of the best solutions is the C omprehensive V aluation I ndex-19 Mortgage Relief program.

So how does this program work? VA mortgages have been one of the most popular programs over the past decade based on the incredibly low interest rates, flexible down payment requirements, and low insurance premiums. The only thing that's limited is that it has to be used for a single-family home and for primary residences only.

These VA loans have another feature that many don't even know about: They release the lien on the property if certain conditions are met. One of the conditions is to refinance or get a home equity line of credit if the property value goes up. This is called the Index 19 Waiver. See, because of the low interest rates and flexible down payments, a lot of military members use VA loans even when they make six figures. When the VA loan came out, veteran's organizations pushed back against these high-income people getting the same program as the lower income veterans. So they created the Index 19 Relief program as sort of a compromise.