Coronavirus Shutdown Is Affecting Debt Reporting and Foreclosures

In the midst of all the chaos and uncertainty surrounding the coronavirus pandemic, some consumers are looking for ways to tighten their belts and prioritize finances.  For other consumers who were already behind on their bills, the virus could spell financial disaster.  This is especially true of workers who abruptly lost their jobs due to mandatory business shutdowns.  Experts say, at a time like this, it’s important to prioritize food, shelter, medical needs and utilities.  If absolutely necessary, you can hit the “pause” button temporarily on some other debts.

Under the recent federal stimulus plan, called the “Coronavirus Aid, Relief, and Economic Security Act” or the “CARES Act” (H.R. 748), which President Trump signed into law on March 27, 2020, lawmakers laid out provisions to provide some economic breathing room for consumers who have mortgages and credit card debt.  The legislation provides forbearance on federally backed mortgage loans, places a 60-day moratorium on foreclosures, and stops adverse credit reporting — under specific circumstances — during the COVID-19 crisis.

To learn more about how the CARES Act could affect your mortgage or credit card debt, call debt relief attorneys at Fesenmyer Cousino Weinzimmer at 614-228-4435 (Columbus), 937-222-7472 (Dayton), or 877-654-5297 (Cincinnati).  We offer a free initial consultation and can help you get back on the road to success.

Coronavirus and Mortgage Forbearance

Federally back mortgages – typically those issued by Fannie Mae, Freddie Mac and FHA – fall under the guidelines of the CARES Act.  The Act does not address private mortgage lenders such as banks, credit unions or other financial institutions.

Consumers with federally backed mortgage loans who’ve been affected by COVID-19, regardless of delinquency status, can get a “forbearance,” which is an agreement between a lender and a borrower to temporarily suspend debt payments.  Homeowners with these kinds of loans are also entitled to a foreclosure moratorium that will last at least 60 days, starting March 18, 2020.

In a press release dated March 18, 2020, Freddie Mac explained it this way:

“These measures are effective immediately and apply to borrowers who are unable to make their mortgage payments due to a decline in income resulting from the impact of COVID-19, regardless of whether they have contracted the virus.

“Forbearance plans provide borrowers with payment relief for up to 12-months and suspend borrower late charges and penalties. It also suspends reporting to credit bureaus of past due payments of borrowers who are in a forbearance plan as a result of hardships attributable to this national emergency.”

Borrowers who may be experiencing financial challenges due to COVID-19 are strongly encouraged to call or email their mortgage servicer – the company you send your monthly mortgage payments to – to discuss options available to help you get through this crisis.

Coronavirus and Credit Card Relief

The CARES Act also amends the Fair Credit Reporting Act (FCRA) to stop adverse credit reporting during the COVID-19 crisis—but only under specific circumstances.  Under the amended FCRA, if you come to an agreement with a creditor (called an “accommodation” under the law) because you were affected by coronavirus, that creditor must report your account as current to the credit reporting agencies, so long as you weren’t already delinquent on payments.  Specifically, the creditor can’t report your payment as delinquent if you’re up to date on the debt and the creditor agrees to:

  • let you defer one or more payments
  • let you make a partial payment
  • forbear any delinquent amounts
  • modify a loan or contract, or
  • give you any other assistance or relief
Additional Reading:  Protecting Your Credit When Marrying Into Debt

You do have to come to an agreement with the creditor first to avoid harmful reporting. And you have to stick to the terms of the deal.  Don’t unilaterally stop making your payments, delay your payments, or pay less than you’re supposed to without talking to the creditor beforehand.

If you were already delinquent at the time of the agreement, however, the creditor can keep reporting the delinquent status to credit reporting agencies unless you bring the account current. Also, in the case of a charge off, the creditor may continue to report it as a charge off.  To find out more, call Fesenmyer Cousino Weinzimmer at 614-228-4435 (Columbus), 937-222-7472 (Dayton), or 877-654-5297 (Cincinnati).

More Information Available About Mortgage Forbearance and Credit Card Relief

The National Consumer Law Center is working with allies, government officials and businesses to find ways to help consumers get through the COVID-19 crisis.  It provides a list of resources, which is updated when new information becomes available, to guide families in navigating these turbulent financial times.

The Housing Policy Council issued a press release on March 23, 2020, providing information about the ways banks, servicers and trade organizations are working to assist borrowers who are adversely affected by COVID-19.

When Bankruptcy Becomes the Best Solution

For some consumers who were already struggling financially and were far behind on debt payments, the coronavirus crisis may force you to explore additional options.  First, let us reassure you that bankruptcy can sometimes provide significant relief and be the fresh start you are looking for.  It allows you to wipe the slate clean and start over, providing hope for a brighter future.

Especially in these difficult times — when a financial calamity was brought about through no fault of your own – talking to a bankruptcy attorney can give you much-needed information and a renewed sense of control.  Bankruptcy may or may not be the right option for you.  There’s nothing like speaking to an experienced legal professional to help calm your nerves and look at solutions.

The law firm of Fesenmyer Cousino Weinzimmer has helped many clients just like you.  And our services are very affordable.  To find out more about how we can help, call us at 614-228-4435 (Columbus), 937-222-7472 (Dayton), or 877-654-5297 (Cincinnati).  We offer a free consultation.

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