Homeowner Loree Stickles, who lost her Lafayette area job and whose husband's hours were drastically cut, sought delayed payments on their mortgage as a precaution but still is paying on the loan to avoid being hit with a lump sum bill for $4,212 in July when the three-month forbearance period is over.
For New Orleans resident Cristina Sanchez Tyson and her husband the lump sum would have been $6,000, so they decided against mortgage forbearance and are continuing payments to a lender that refused to negotiate moving the payments to end of their loan.
"This seems to entirely defeat the purpose and does not offer financial relief. If I were to not have the amount for one month, what makes them think that I could come up with the amount for three months if the hardship continued," said Tyson, who works remotely in her job but whose husband's restaurant hours were severely cut. "If we had really lost our second income completely it would have been very stressful and challenging to afford the balloon payment."
Baton Rougean Heather Banks and her husband are making payments after their lender failed to send them agreed-to forbearance paperwork.
Also from Baton Rouge, Noura Skakri, who teaches yoga classes and is a massage therapist, and her husband are making partial mortgage payments as best they can, even though forbearance was approved by their lender. She's doing some online sessions, but mostly is out of work because of the state-imposed shutdown of nonessential businesses and stay-at-home order in mid-March to contain the spread of the coronavirus pandemic.
To keep mortgage payments going, the homeowners are cobbling together savings, unemployment checks or federal relief funds they've received to prevent being hit with a huge lump sum bill, which could potentially be avoided if lenders eventually are willing to alter the terms of their mortgages.
Stickles isn't taking any chances with her mortgage servicer. She already tried negotiating, asking that several months of payments be added to the end of the loan, which she initially thought was approved.
“We were given incomplete information, then have to scramble,” Stickles said. “We specifically asked about that but they made it a balloon payment anyway. They said they had to put it like that, but they would talk to us (later) and maybe put it at the end or just bump up the monthly payments.”
Like the Louisiana homeowners, an estimated 3.8 million homeowners across the country are living not only on borrowed money, but also borrowed time.
About 7.5% of home mortgages across the U.S. were in forbearance as of April 26. In early March before the onslaught of the coronavirus pandemic, less than 1% of home mortgages were in forbearance, according to the Mortgage Bankers Association national survey. And that number is still expected to grow in May.
State-level data was not available, but the two largest independent mortgage servicers in Louisiana — GMFS LLC and Assurance Financial — estimate that more than 5% of their loans have been approved for forbearance so far. Even if borrowers are off the hook for payments for a few months, the money is still due.
“Those payments are contractually still due at the end of the 90 days. The borrower either pays all three months or they are evaluated for further forbearance and various loan modification options,” said Tee Brown, chief financial officer of Baton Rouge-based GMFS LLC.
Some options are available to negotiate with lenders: A loan modification would change the terms of a loan. That potentially could lower the monthly payment, but the recalculated loan and the arrears added to the balance might make monthly payments go up. A repayment plan could allow past-due payments to be spread out over the term of the loan by adding them to the current mortgage balance. A loan extension could add the past-due payments to the back end of the loan.
Money is already tight and many of the Stickles' bills, ranging from flood insurance to groceries, are getting put on credit cards. Stickles said she recently started receiving unemployment benefits and the couple received federal stimulus checks that Congress approved for individuals of $1,200 each. The couple has been making mortgage payments to avoid the lump sum option using the stimulus money. Stickles is looking for another job in the meantime.
Just in case, she's already thinking of other options in a worst-case scenario.
“I’m not even thinking foreclosure at this point,” Stickles said. “We have retirement accounts we can hit up before that happens. Incidentally, those accounts took a huge hit with the stock market crash, so it is less than we would have liked.”
The naturalist educator, who doesn’t expect to go back to work until August, and her husband, a crane operator in the hard-hit offshore oil and gas industry, actually have two mortgages right now. The other is on an old house the couple has been trying to sell, but the market has been down. Fortunately, the delayed mortgage payments for that house are being moved to the end of the loan by its mortgage servicer.
“The intent of all of this is to prevent foreclosure. The last thing any servicer wants to do is foreclose,” said Brown, of GMFS. “Even if you can’t make your full mortgage payment, pay some of it if you can.”
Under the federally approved, Coronavirus Aid, Relief, and Economic Security Act, homeowners were provided with two types of protection.
A foreclosure moratorium prevents lenders or loan servicers from beginning or proceeding with a foreclosure for 60 days. That started March 18.
The CARES Act also allows homeowners experiencing coronavirus-related financial difficulties to request an initial forbearance of up to 180 days. An extension for another 180 days can be sought. Interest still accrues, but fees and penalties are waived. Many lenders have gone with an initial 90-day forbearance period.
The CARES Act forbearance provisions apply to mortgages that are federally owned or backed by Fannie Mae, Freddie Mac, Department of Housing and Urban Development, Federal Housing Administration, Department of Agriculture or Department of Veteran Affairs. Each type of loan has guidelines for forbearance. For example, a conventional loan can be in forbearance up to a year.
Otherwise, investors holding mortgages not backed by the federal government set the terms of any assistance or loan relief.
When a mortgage is in forbearance, that's not supposed impact the borrower’s credit score, but missed payments outside of that agreement could.
GMFS’s leadership expects the economic impact of the coronavirus pandemic to cause more borrowers to seek forbearance than after the 2016 flood in Louisiana, when about 7% of its mortgages were in forbearance.
That’s the trend Assurance Financial is seeing as well.
“We are seeing more demand for forbearance relief today than during that disaster,” said Kenny Hodges, CEO of Assurance Financial. “We are expecting numbers between 12% to 18% when it’s all said and done,” Hodges said.
The executive encouraged borrowers who are not facing financial hardship to continue paying home loans if they can.
That’s what Banks and her husband are doing. The Baton Rouge residents were approved for forbearance through their bank for at least three months and up to six months before the loan is modified. However, the bank never sent the forbearance paperwork, a mistake that's frustrating to Banks. So, she’s holding off as long as she can.
Banks said she was laid off from a small business that sells copiers, and has dipped into savings to pay the mortgage. She recently went back to work after her employer was approved for a federal Paycheck Protection Program loan, designed to keep employers' workforces intact and on the payroll until the national economy revives.
Her husband works as a tankerman in the oil and gas industry, which is considered an essential business.
“I will just continue to pay as it’s not worth getting into arrears; I have savings," Banks said of her mortgage.
“It’s tight, but OK, we thought about (mortgage forbearance) but in the end we just want to stay level,” she said.
So far, the couple fared far worse after the 2016 flood. Banks had lost a previous job and took a $20,000 pay cut. They are still paying off a loan from the flood.
“I feel we will rebound quickly from this, but the flood still hurts,” Banks said. “This is more of a hiccup, not a soul crusher.”
"We are simply being beyond cautious with our budget and hoping that we can ride it out without altering anything to our loan and bills," Tyson, in New Orleans, said.
Her husband qualified for state unemployment in addition to the federal boost, which has been helpful. Stimulus checks also have helped the couple, but if the economy doesn't rebound after that money runs out it would be a tight squeeze, she said.
Skakri, whose managed to make partial payments on her mortgage, offers wellness services in Baton Rouge, in addition to teaching yoga classes and being a massage therapist. She’s been out of work more than a month under state restrictions that closed nonessential businesses like hers.
Skakri was finally approved for federal unemployment benefits after weeks in limbo and more recently got approval for a federal Paycheck Protection Program loan as an independent contractor, so she can have some income while her businesses are on hold.
She was approved through her bank during the second round of federal funding.
"I was off to a very busy start this year," Skakri said of her business before the coronavirus outbreak.
Since then she's gone from working upwards of six days a week with about 30 clients to a handful of virtual sessions. Some clients have paid for future sessions to help with cash flow.
She had been living day by day and doesn’t have savings to fall back on, but the situation has improved significantly. She hopes to start seeing clients before the end of May, depending on state orders that recently extended restrictions through May 15.
“I’m a bit torn about it. I’m ready to go back to work, but I don’t want to see a second wave of cases,” she said.
In the meantime, she’s used some of the federal loan to purchase an ultraviolet light to sterilize rooms between uses by clients and also supplies to allow her to do home visits when allowed, in addition to paying herself and rent at the studio.
About three months of car loan payments were pushed back to the end of a loan after she negotiated with the company.
Her mortgage is in forbearance and would face about a $3,000 lump sum, but the goal is to avoid that. She made two partial payments for April and is prepared to do the same for May with the federal support.
“A load was taken off my shoulders,” she said about the financial support.