In just three weeks, the United States lost about 17 million workplaces. This means that unemployed Americans with a mortgage will no longer be able to make monthly payments for several months, if not longer.
The situation is aggravated by the fact that the assistance offered by the federal government under the Cares Act, approved by Congress, can accelerate the emergence of a mortgage crisis, which, in theory, should prevent it. The mechanism for providing assistance to homeowners is very confusing and highly depends on the type of loan available, as well as how the lender interprets the text of the document.
Why is the Cares Act hard to call useful for all homeowners? The fact is that this program offers mortgage support only to those who have a government-backed mortgage guaranteed by the government. This means that a US citizen is eligible for assistance if his mortgage on a residential building or apartment is insured by the Federal Housing Authority (FHA-loan), the Department of Veterans Affairs (Veterans Affairs loan), the Department of Agriculture (loan backed by the Agricultural department) or his loan complies with section 4022 of the Cares Act.
If the borrower has a private loan (unsecured or uninsured by the state), and there are, by the way, several million people, then he should not expect help from the government and he is in the power of his bank.
So, what does the borrower get if he meets all the criteria of the Cares Act, assistance is provided in the form of deferred payments up to 180 days, with the possibility of an additional extension of 180 days, if necessary (that is, a maximum of 360 days). As soon as the borrower informs his lender in writing that he was directly or indirectly affected by the COVID-19 pandemic, he is automatically granted a deferment – no documents are required.
But this is where difficulties can arise. There are no details of the procedure in the text of the law, it only speaks of the provision of assistance in the form of a deferment of mandatory payments. In addition, it is unclear whether a grace period for the whole or part of the mortgage is granted. This is very important, and many mortgage lenders will probably try to take advantage of this gap.
No doubt, deferred payment conditions are very important. While the law clearly states that a mortgage company cannot levy additional deferral fees, nothing is said about the terms of the transaction. So, for example, wouldn’t it be necessary to refinance a house for a new payment schedule after a delay, and would the creditor introduce a higher interest rate and increase the monthly payment? Will the bank be merciful and simply transfer the missed payments to a later time? Or will you have to take a new loan and make payments after some time?
Unfortunately, there are no clear answers to any of these questions, and the lack of clarity can lead to the fact that millions of Americans will not be able to take advantage of federal assistance, stop servicing their mortgage loans and, as a result, lose their housing.
Already there are signals that some lenders provide a 90-day deferment to those who have a state-guaranteed loan, provided that after three months it is necessary to pay the full balance plus the current month. For many, this can only mean bankruptcy and the lender taking over the property of the debtor, and this will overturn the American economy in something similar to the Great Depression.
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