Using Mortgage Forbearance to Free Up Money to Pay Assessments
As many homeowners are presently facing a job loss or reduction in their income, they are now more worried than ever about how they are going to pay their bills moving forward, including their monthly maintenance fee to their homeowner or condominium association. The association, on the other hand, continues to need homeowners to meet their obligations so that essential services, including but not limited to landscaping, garbage removal and security, can still be provided. What should the board and management do when a homeowner requests a forbearance of his or her maintenance fees due to such circumstances?
Advise homeowners that they may have some relief under the federal Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”). Per the CARES Act, homeowners who have a federally-owned mortgage can request a forbearance on mortgage payments for up to 180-days or six months; lenders are not allowed to charge any fees, penalties or interest beyond what would have been due had the borrower remained current during this forbearance period. This relief applies to all home loans that have been purchased or securitized by Fannie Mae and Freddie Mac as well as FHA Loans, USDA Loans, VA loans as well as.
Most owners that have a mortgage loan that was purchased by Fannie Mae or Freddie Mac – the two government sponsored entities that own 70 percent of all residential mortgages – don’t know that their mortgage is held by one of those two entities. They wouldn’t know because their mortgage payments do not go to Fannie Mae or Freddie Mac but, rather, monthly payments go to a mortgage servicer, which is often a bank. But it is very easy for homeowners to find out if they have a mortgage held by Fannie Mae or Freddie Mac. They can click here to see if they have a mortgage owned by Freddie Mac or click here to see if they have a mortgage held by Fannie Mae. Each of those sites will locate a mortgage held by those federal entities and they can start the process of seeking a forbearance.
Under the CARES Act, the homeowner does not need to provide any documentation demonstrating a hardship, all the homeowner needs to do is submit a request to the loan servicer that they are experiencing a financial hardship due to COVID-19, either directly or indirectly. If a homeowner is unsure, as many are, whether or not their mortgage would qualify and they have a FHA or VA loan, they should contact their loan servicer directly to determine if their loan qualifies. Otherwise just use the links above.
If a homeowner comes to the association with regard to their current hardship, management and/or the board may want to encourage the homeowner to contact Fannie Mae or Freddie Mac using the above site or his or her mortgage servicer for an VA or FHA loan and determine if their mortgage qualifies for this relief. If so, it will free up some of the homeowner’s funds so that they can pay other bills, including the association, as well as hopefully avoid a possible default in their mortgage and foreclosure down the road. Alternatively, you may want to make all owners in your community aware of this benefit so they can start the process before seeking your assistance.
If you have any questions about this or any other community association matter, please feel free to contact any of the attorney’s in our New Jersey Community Association Practice Group.