Are you, or someone you know, a landlord needing help with mortgage payments or other financial obligations? You’re not alone!
As the nation grapples with a pandemic induced recession, the trickle-down effect of the financial burdens renters face and the federal eviction ban on the rental market has cascaded into a scramble for landlords to find funding to pay the mortgage and other business expenses.
As eviction moratoriums continue through the end of the year, if dealing with negative cash flow, the below resources and rent collection suggestions may help get you through these tough times.
Simply defined, mortgage forbearance is requesting a modified payment plan with a mortgage lender during a time of hardship. It typically requires a qualifying event such as a pandemic related recession.
The Coronavirus, Aid, Relief, and Economic Security Act (CARES ACT) allowed suspension of payments, fees, and foreclosure relief for federally backed loans, and met its end August 31, 2020. However, some areas have put in place state or local mortgage forbearance requirements.
Until Congress passes a new national relief plan, if you are not covered by a local or state mortgage forbearance initiative, it would be up to your lender’s discretion on the options available. It never hurts to reach out and ask them directly.
Working with Your Mortgage Lender
When speaking with your mortgage lender, ask about their hardship plans. Likely they will offer a few forbearance options which defer mortgage payments. In that, mortgage payments are entirely paused for 6-12 months, with an agreement to either pay it back at the end of the forbearance in full, added deferred amount divided back into the remaining mortgage period, or in the form of a new loan for the deferred portion.
Keep in mind whatever mortgage forbearance option is available, it is not a forgiveness program and the entire mortgage is still required to be paid-in-full. It’s just a creative way of payment that leaves you with a little more cash-flow during these uncertain times.
Knowing the options available to you may help you make ends meet on your other financial obligations while the eviction moratorium period is in place.
If rent payments are not coming in, having a pause on paying this expense could be a lifesaver for your rental business. Just remember, the funds are still owed, and only take the repayment option that makes the most financial sense for your projections.
Likely, a forbearance will not affect your FICO score, but it may impact other areas of concern. It’s recommended to speak to a financial advisor and accountant before making these important decisions.
Modified Loan Agreement
Some mortgage lenders may opt to allow a reduced payment amount for a time-period with an agreement of repayment in some manner like the above. Again, these mortgage loan modifications typically require proof of hardship.
The two most common loan agreement modifications take the form of refinancing for a longer-term period or a lower interest rate. In either case, the monthly payment amounts are reduced leaving cash available for other expenses or to cover income loss.
Options Beyond Refinance and Forbearance
A few outside-the-box ideas to get a little cash flow can come in handy.
Equity Line Of Credit
Some homeowners who aren’t interested in refinancing their mortgage or seeking forbearance are tapping into their home equity with a line of credit. Getting an equity line of credit can be faster that refinancing or working out forbearance options and gets you some cash-on-hand quickly.
Cancel Private Mortgage Insurance
Commonly, a mortgage loan initiated with less than a 20% down payment requires paying a Private Mortgage Insurance (PMI). Those payments follow a standard two-year rule. Check to make sure your PMI has ended if beyond the two-year requirement, or give them a call to discuss exceptions; such as the amount of home equity acquired or current hardship concerns. It might not be much but that amount could then go towards the mortgage payment directly.
Consider contacting your county tax assessor to discuss the valuation of the home. It might require a new appraisal, but if you feel home has a significantly lower value you could see considerable savings from the reduced tax payments.
City, County, Federal Business Loans and Grants
The phone is your friend when it comes to finding local loans and grants. State and Federal resources are often sent to the city and county departments. From there, some of those are then handed over to local agencies or financial institutions for distribution.
For instance, your local bank or credit union may be the distribution center for community grants and might not require an account or membership. So be sure to call your city and county offices and ask about loan and grant availability and requirements.
Forgivable or low-interest loans and business grants are also available through state and federal agencies directly. Here are a few resource links researched to help:
- US Small Business Administration (SBA) SBA Debt Relief Efforts
- USA GOV – Temporary Mortgage Relief Due to Coronavirus Pandemic
- Federal Rural Development US Department of Agriculture (USDA) provides dozens of grants and loans through their Rural Business-Cooperatives Service
Other Mortage and Business Resources:
- Housing and Urban Development (HUD) Coronavirus Resources for Homeowners – HUD.com
- Consumer Financial Protection Bureau (CFPB) Mortgage and Housing Assistance During the Coronavirus National Emergency
Help Your Tenants Make Rent Payments
The best help for cash flow is to find ways to help your tenants through this season of difficulty. Any resources you offer your renters to help them pay rent and meet their financial obligations benefits everyone.
Share this handy guide with your tenants or anyone struggling to make ends meet:
Tenant Resources | Help with Rent and Other Financial Assistance
The above resource is also useful for anyone needing to find financial assistance for personal expenses and provides information to community services, charities, and other providers.
Another way to help your tenants pay rent is by making the process easier with electronic payments. Data shows accepting online payments increases the likelihood of tenant payments. A good property management software will have options for tenants to make payments by ACH (electronic payments from a bank account), credit or debit card, or at a cash payment network location.
Taking it One Day at a Time
It’s anticipated that before long a new stimulus package will release more funds to both individuals and businesses to ease the burden of the recession. Until then, it may be necessary to reach out to agencies, financial institutions, and departments often and keep an eye on the news and blogs for tips and tricks to get through this together.