Mortgage payments, evictions on hold for some Californians
Much has dramatically changed — and very quickly.
Concerns about COVID-19 and the rapid spread of the deadly virus prompted Gov. Gavin Newsom to issue a statewide shelter-in-place order March 20. The action, aimed at reducing the risk to the public, has caused a tsunami-like economic wave.
Companies have changed operations — including having employees work from home — closed temporarily, or even shut down permanently. And a couple million of hard-working Californians have endured furloughs, layoffs or, at the very least, a significant decline in their work schedules.
On March 31, Newsom said more than 1.6 million Californians had filed for jobless benefits with the state Employment Development Department. That would be the most unemployed residents since September 2013.
Those affected employees would become the second-largest city in California, behind only Los Angeles. All of the people in Long Beach, Sacramento and Oakland combined would still fall short of those unemployed in the state.
Well, you get the idea. Lots of people, lots of pain.
Many of those jobless residents will need assistance beyond unemployment checks and the federal government payments of $1,200 per person for those who earn less than $75,000 — or up to $150,000 for married couples who file their incomes taxes together (the amount of the federal checks declines the more you earn, up to a maximum of about $99,000).
But those federal assistance checks and even the enhanced jobless pay that will top more than $1,000 per week for some unemployed will only go so far, especially in high-cost California. There is some help available when it comes to housing, for homeowners and renters. Here is a quick look:
Homeowners with FHA-backed mortgages could get a helping hand for up to a year
Uncle Sam, Auntie Fannie and Uncle Freddie are coming to the rescue, sort of.
Federal officials have ordered an immediate halt to foreclosures and evictions for homeowners with mortgages backed by the Federal Housing Administration or Fannie Mae and Freddie Mac. The move will help about 30 million Americans, including a few million homeowners in California.
Mortgage servicers — basically the company that collects the monthly payments — have been ordered to establish forbearance programs, allowing homeowners affected by COVID-19 to miss their mortgage payments for up to a year.
Now, homeowners must apply for the assistance through their mortgage servicer, which will determine how long they can skip those payments and under what conditions.
“The government is essentially offering a year-long payment holiday to those who lose their jobs from COVID-19” and many may not need to make a payment before May 2020, says Jaret Seiberg, a financial services analyst at Cowen Washington.
Of course, homeowners must make the payments eventually, either over several months or possibly at the end of the mortgage.
What is forbearance?
Forbearance (for-bear-ance) is a temporary postponement of mortgage payments. It is a form of repayment relief granted by the lender or creditor in lieu of forcing a property into foreclosure. Loan owners and loan insurers may be willing to negotiate forbearance options because the losses generated by property foreclosure typically fall on them.
But Uncle Sam’s helping hand allows struggling homeowners to get back on their feet without worrying about mortgage payments — or losing their home.
Banks, credit unions offer three-month break from mortgage payments
Millions of Californians with conventional mortgages — those not backed by the federal government — can apply for a three-month moratorium on their payments.
Governor Newsom announced a deal March 25 with four of the nation’s biggest banks — CitiBank, J.P. Morgan Chase (better known as Chase Bank), U.S. Bank and Wells Fargo — to help customers affected by the coronavirus for three months. Bank of America agreed to assist homeowners on a case-by-case, month-by-month basis.
Another 200 banks and credit unions also agreed to the 90-day deal.
Californians affected by coronavirus should contact their mortgage lender for the details on how to apply and if they are eligible for the moratorium.
However, homeowners will need to catch-up on those missed payments, either a few months down the road or at the end of the original contract.
Homeowners who enter an agreement with their mortgage servicer will not have their credit scores affected, foreclosed on or evicted during this period.
State, many cities and counties ban evictions for coronavirus-affected tenants
Gov. Newsom has ordered a two-month ban on evictions statewide, allowing tenants affected by COVID-19 some time to get back on their feet and pay the rent.
The executive order, announced March 27, helps Californians who have lost their jobs or are taking care of school-aged children or family members with COVID-19. Now, tenants must notify their landlords in writing within seven days of missing the rent, and landlords can still file an eviction notice for nonpayment at the end of the two-month moratorium.
But the 60-day eviction ban gives residents affected by the coronavirus — remember that at least 1.6 million are now jobless — some time to recover financially or physically, or perhaps both. And renters often earn less than homeowners and are more likely to be in the hardest-hit industries, such as retail.
Tenants would still need to pay the missed rent after the two-month eviction ban, or they could face court action, including eviction.
Almost 100 cities and counties in California, from Agoura Hills to Yolo County, have established their own coronavirus-specific tenant protections, according to the California Apartment Association. Check if your city or county is on the list and the protections for tenants. Each municipality has its own protections for tenants.
The California Apartment Association “urges rental housing providers to act with compassion in dealing with residents who face coronavirus-related hardships.” The association represents owners, investors, developers and managers of apartment communities and rental homes.
Of course, allowing tenants to skip rent, even for a few months, could hurt owners of apartment communities and their employees, creating an economic ripple effect.
But the Federal Housing Finance Agency — yes, the same agency that is helping some homeowners with their mortgages — has announced financial help to landlords, if they don’t evict tenants affected by coronavirus.
The first-ever program would allow landlords to miss payments for up to three months. Landlords need to own a building with at least five units and have either Fannie Mae or Freddie Mac loans.
“Renters should not have to worry about being evicted from their home, and property owners should not have to worry about losing their building, due to the coronavirus,” says FHFA Director Mark Calabria. The effort should “bring peace of mind to millions of families during this uncertain and difficult time.”
Buying a house and closing escrow
Let’s just preface this by saying this is probably not the best time to buy — or even shop for — a house. Remember, the shelter-in-place order is in effect for a very good reason.
And some counties and cities — including Los Angeles — are already banning in-person tours of homes, according to the California Association of Realtors.
Plus, many homeowners and home-shoppers, and even some real estate agents, are reluctant to open the door and increase the risk to COVID-19. CAR has developed some excellent guidelines to reduce the risk during the COVID-19 pandemic.
But even with guidelines and social distancing, many folks are hesitant to list their home or shop. In fact, consumers asking to see a home has dropped 27% the past two weeks nationwide, and even higher in California and Washington state, according to Redfin. (California-specific figures were not available).
Video tours definitely help and can narrow down the choices, but buying a house is by far the largest-ever purchase for most Californians, so relying on a video could be troublesome.
Some real estate brokerages have developed coronavirus-related closing documents, which extends the period — and reasons — a buyer can walk away from the transaction. Ask your agent about the details, and possibly escrow agent and mortgage broker.
And if you are moving ahead on a purchase or sale, patience is definitely a virtue. A massive wrench has been tossed into the home-purchasing machine, including employees who may be working from home and surrounded by their children. So, completing the deal could take longer than usual.
CAR president Jeanne Radsick says “sales in escrow may be delayed by the closure or limited availability of all the essential services related to a home sale, such as financing, title, escrow, recording or by buyers who may have backed out of a purchase due to coronavirus concerns.”