The U.S. Orders A Break On Mortgage Payments. What Does That Mean?
LULU GARCIA-NAVARRO, HOST:
Now, there is some encouraging news for homeowners, who are almost 65% of households in this country. If you lose income because of this crisis, the federal government says lenders should allow you to make partial or even no payments on your home mortgage for up to one year.
We're joined now by Mark Calabria. He's the one who gave this directive this past week, and he heads up the Federal Housing Finance Agency.
Welcome to the program.
MARK CALABRIA: Good morning.
GARCIA-NAVARRO: Good morning. And Chris Arnold is also with us. He covers the housing market for NPR.
CHRIS ARNOLD, BYLINE: Hey, Lulu.
GARCIA-NAVARRO: All right. We'll both be asking questions. Mike - Mark Calabria, it's probably really welcome news to a lot of homeowners right now that up to a year of their mortgage might be forgiven. In a sentence, why did you do it?
CALABRIA: Well, we thought it was critical to be able to give some comfort and let people know what the situation is and certainly wanted this time - reduce the stress. We're all feeling stress in a variety of ways, and the last thing you should have to worry about is losing your home right now.
GARCIA-NAVARRO: Give us some details. What exactly did you tell banks and other companies that manage mortgages to do here?
CALABRIA: So let me talk about two different types of borrowers. Let's talk about the first type of borrower who are directly impacted. And when I say directly impacted, this is not necessarily that you or anybody in your family has taken sick. But if you've lost your job because your employer - or even if you've had a decline in income or if, you know, your spouse has lost their job but you haven't lost yours, you would direct - you would contact the lender you deal with every month - your servicer - and they would try to work out a plan.
So for instance, if your spouse has lost their job and you haven't, you know, you may be expected to pay half the mortgage payment. If you've completely lost your job, they may be able to get you down to no mortgage payment. I do want to emphasize all of this is forbearance, which means it would eventually be added to the remainder of the mortgage. So it is a time-out.
GARCIA-NAVARRO: You have to pay it back.
CALABRIA: Exactly. And so that's for borrowers who directly impacted. As we also know, they were families who would've been facing foreclosure already enough for issues that are unrelated to the virus. And partly to deal with their hardship but also with the public health concern - 'cause you could imagine we don't want to put families on the street and be exposed to the virus. We don't want to have to have, you know, say, sheriff's department come through and deal with foreclosures in the same way.
So for families that were facing a foreclosure already existing pre-crisis - and most of these are families where you're already a year or two beyond the last payment - there is a 60-day moratorium on any sort of foreclosure related to that.
CALABRIA: And if this continues to go on past that 60 days, which goes to May 17, then we will extend it. But again, like everybody else, we're trying to figure out how long this is going to go on.
ARNOLD: And a question that I have, Mark, is so technically, this applies to about half the mortgages in the country because you control Fannie Mae and Freddie Mac, and they guarantee those loans. But for the other half - we're talking about millions of other mortgages - you expect the rest of the industry to follow suit and do something very similar.
CALABRIA: I do. On the same day that we announced this, HUD, which runs FHA, which is a very large part of the mortgage market, announced that they would institute similar procedures. I know a number of the large banks - Wells Fargo, Bank of America - many others have already announced. And so we thought one of the reasons we wanted to get something out was we thought if we set some parameters, then we can set up some standards that everybody else could move to. And we've really seen that. So I can't say that a hundred percent of the mortgage market is covered right now, but I think it would be fair to say that over 90% of the mortgage market is covered right now.
GARCIA-NAVARRO: One question, though - if lenders don't do this, can you or other regulators compel them to?
CALABRIA: We can in terms of the regulator - the lenders that we do business with. So of course, no lender is entitled to do business with Fannie and Freddie. If you don't meet our guidelines, you don't do business. So lenders are highly incentivized to want to cooperate with Fannie and Freddie. And of course, ultimately for the servicer lender who handles the loan, if they want to get paid at the end of the day, they're going to cooperate.
So they're highly incentivized to work with us on this. And so far, we've seen nothing but cooperation - I really do want to emphasize. We've also heard the same sort of problems that everybody else is facing. We've heard from servicer lenders that their capacity is down about 30%. Obviously, much of their staff is working at home, teleworking...
GARCIA-NAVARRO: Meaning that people can't get through; they're having trouble talking to their lenders.
CALABRIA: Absolutely. And so they're going to be some bottlenecks, which is one reason I really would emphasize to listeners - if you don't need immediate assistance, please don't call because you will take time and attention away from families who do need assistance.
GARCIA-NAVARRO: Just briefly, what are the requirements here? Do people need documentation of some kind?
CALABRIA: So initially, you'll essentially be able to state your situation. You'd say, I've lost my job; I've lost a hundred percent of my income. Over time, we want to make sure that if you get your job back, if you're getting unemployment insurance, they'll calculate that into - so over time, we'll have a new income payment adjusted.
But again, it's also important - keep in mind - because as we talked about earlier, it's going to be forbearance. You'll have to pay it back. But you really are in a situation where if you can pay half of it, if you can pay a third of it, you should try to go ahead and do that.
And I think before you talk to your servicer, what you should do is write down on a piece of paper, you know, what's been your income decline. Has it been a hundred percent? Has it been 50%? Calculate a payment. If you can say, listen; I can make X, I think that will make the process a lot easier, a lot quicker.
But again, at the front end, it's really going to be - we're going to take your word for it. You're going to tell us how much you've had a decline. We're going to get you in. And over time, we'll try to make sure we get people to a payment that's manageable. And obviously, we want to get everybody back on their feet and making their normal payment as soon as we can.
ARNOLD: And when we get to that point where - OK. You know, there's different kinds of repayment plans. And if it's all right - well, somebody got their job back, and we want the economy to get humming again. If it's just extending the loan term, the payments stay the same. That seems, like, very manageable for people.
On the other hand, if this is done in a way by certain lenders that they might raise payment significantly for people, that would be bad for that person and, you know, as an economist, bad for the economy. When we're trying to, you know, recharge things and get up and running, we don't want to be saddling people with higher mortgage payments, right? So are there some rules around how that's going to work? - the payment.
CALABRIA: So there are. So any fees, any interest charges - those are being suspended. So it's not as if we're charging you interest during the time that it's going to be delayed. And we want to work with the borrower. And of course, if there are borrowers who - let's say this goes on for two months, and you've delayed 60 days - two months of payments. If you're in a position where you can pay half of that or you want to be able to add that or you want to add it to the end where we just extend the term of the mortgage for another two months, there are going to be a variety of options on the table, and we want to be able to try to get borrowers current again as soon as we can.
And again, there may be circumstances where if the borrower chooses to add to their payment and say, you know, I was delayed two months, but tell you what - why don't you add another $50, hundred dollars to my payment going forward? - you know, that'll be an option. But it's got to be something that the borrower's got to be part of.
GARCIA-NAVARRO: Just briefly, we've been talking about homeowners. But of course, millions of people in this country rent their home or apartment. What can be done for renters?
CALABRIA: So for starters, our pause and our forbearance applies to properties where the landlord can also ask for assistance. So let's start with about a third of renters live in single-family units, which, of course, include townhouses, rowhouses. So if you are having trouble making your rent, talk to your landlord first. If your landlord can call the lender and has a Fannie and Freddie loan and says, OK, I can't make the mortgage because I can't collect rent from my tenant, then the landlord can get forbearance. And of course, part of that agreement would be that they're passing along the forbearance to the renter.
CALABRIA: Same thing here - would have to be made up again by the landlord. So some of this is trying to work with your landlord. I also notice, I think as most people aware about - little more than 10% of rental units are either public housing or voucher or some sort of government assistance.
CALABRIA: And HUD is working to make sure that those families are being taken care of.
GARCIA-NAVARRO: Mark Calabria, thank you so much.
CALABRIA: Absolutely. My pleasure.
GARCIA-NAVARRO: He is the director of Federal Housing Finance Agency. Transcript provided by NPR, Copyright NPR.