Are You Among the 20% Who Can’t Pay Their Mortgage?

How confident are you that you’ll be able to pay your mortgage this month? If the answer is “not very,” then you’re not alone. In fact, according to a US Census Bureau survey, 20% of Americans said that they had “slight or no confidence” that they’d be able to make their rent or mortgage payment for June 2020.

This fact will come as no surprise to most of us — but the scale of the change might.

This article will break down some of the key findings from the survey, and explore why so many of us are struggling with our payments — but it’s not all doom and gloom. If you’re part of the 20% who can’t pay your mortgage, there are ways to get back on track and find the help you need.

The survey touched on several key areas:

Household Income. Forty-seven percent of US households reported that they had lost income from their employment since March 13th; this income loss has disproportionately affected low-income and minority households. If your household income is less than $75,000, you’re almost twice as likely to have seen a reduction than if your income is over $200,000. More than 50% of people in the first bracket have been affected, compared to just 29% of people in the second.

Food Scarcity. According to providers of emergency groceries throughout America, one-third of people who now rely on food aid had never needed it before the outbreak of Coronavirus.

Mental Health. Unsurprisingly, almost 30% of American adults feel anxious more than three days a week, while 23% feel uncontrollably anxious, and 19% feel depressed for more than half of each week.

Why Are Americans Struggling To Pay Their Mortgage?

The number of people who can’t pay our mortgages has skyrocketed since the Coronavirus outbreak. The biggest explanation for this is the fact that unemployment levels have soared. More than 36 million people have applied for unemployment benefits since Coronavirus began forcing workers out of their jobs. The number of new applications is four times higher than the previous record.

These figures might not even tell the whole story. Across the country, millions of Americans are still technically employed but unable to work because the nature of their contracts doesn’t allow them to receive a salary while Coronavirus measures are in place.

What Should You Do If You Can’t Pay Your Mortgage?

According to the survey, the number of Americans who are struggling to make their rent or mortgage payments tallies with the number who have reported mental health problems; this is almost certainly no coincidence. And for many people, the prospect of meeting rent or mortgage payments is only going to get worse.

The extra $600 a week that Congress added to federal unemployment benefits as part of the CARES Act in March expired at the end of July; this may leave households struggling more than ever. As Bob Pinnegar, President of the National Apartment Association puts it: The enhanced unemployment benefits are helping Americans “to make ends meet and to be able to put food on the table, to pay their utilities, and to pay their rent. The challenge is going to be going forward.”

The good news is that nobody has to suffer in silence. There are several ways to get assistance if you can’t pay your mortgage due to COVID-19:

1) Hardship Forbearance

Both Fannie Mae and Freddie Mac have urged mortgage servicers to remind their borrowers that a hardship forbearance is an option for homeowners with federally-backed or owned mortgages.

Thanks to the CARES Act, you may be able to arrange up to 12 months of mortgage forbearance with your servicer. Forbearance will enable you to reduce your monthly payment — or even postpone it altogether — for as long as your agreement allows.

Once your forbearance period has come to an end, you will have to repay your outstanding payments in full. Your servicer can’t demand that you hand over these payments all at once, so make sure that your repayment plan is achievable.

To qualify for forbearance, you need to prove that your financial hardship is purely a result of the Coronavirus pandemic. If you’re unsure whether you’ll be able to pay your mortgage once the effects of the pandemic have died down, forbearance might not be a sensible choice. The last thing you want is to set yourself up for payments you’ll struggle to make in the future — so contact your servicer to find out whether you’re eligible.

2) Ask Your Bank For Assistance

In March, Bank of America announced that it would provide extra support to customers who were struggling financially as a result of Coronavirus. As part of its plans, clients can request to defer their mortgage payments, adding any they miss on to the end of their loan. They can also defer credit card payments and business loans.

If your mortgage is provided by Bank of America, consider getting in touch with their client services team to discuss deferring your payments. Other banks are also offering forms of mortgage relief. These include: US Bank, Ally Bank, Citi, BMO Harris, Fifth Third Bank, and HSBC.

Forbes has published a list of banks offering mortgage deferments here, so take a look to see if yours is included.

If you can’t pay your mortgage during the pandemic, mortgage deferment may be a sensible choice. As long as you’re currently up to date with your mortgage, requesting to defer your payments won’t negatively affect your credit score.

As with any financial decision, make sure that you’re fully aware of any terms and conditions before you agree to anything. Some banks might offer mortgage deferment, but still charge late fees on any payments you miss — even if you’ve arranged to miss them.

3) Know Your Rights When It Comes To Eviction

In March, Donald Trump announced that the Department of Housing and Urban Development would be suspending evictions until the end of April. This measure was put in place to protect tenants who could prove that they were unable to pay rent as a result of Coronavirus. Since then, many states have chosen to extend this policy; other states, including Iowa and Texas, have removed the eviction ban already.

So with policy changing state by state, it’s vital to know what your housing rights are during the Coronavirus outbreak.

And your rights don’t just depend on which state you live in. According to federal policy, your landlord can’t evict you for failing to pay rent if your apartment building has an Enterprise-backed mortgage and Coronavirus has made it impossible for you to pay; the Federal Housing Finance Agency has created an online search tool so you can find out whether your building applies.

Final Thoughts

The Coronavirus pandemic has certainly been a challenging time for many. But by staying informed about your options, you can get at least get a head start in getting your mortgage and your finances back on track.

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About the Author: Chris is a personal finance writer who started a digital marketing business that focuses on freelance writing, content marketing, and SEO; all while working full-time and playing dad to two kids. To read more, check out his blog: Money Mozart.

Photo Credit: Woodley Wonderworks