A recent survey by the Mortgage Bankers Association demonstrated a 4 percentage point jump in delinquency rates during the last quarter, the largest quarterly rise to be reported in MBA history. Specifically, FHA loans demonstrated a record high number of delinquency rates. In Boston, Massachusetts, early-stage delinquencies (over 30 days past due) were up to 4.7% in April, an increase of 2.9% from April 2019. Marina Walsh, the Vice President of Industry Analysis at MBA stated,
“The COVID-19 pandemic’s effects on some homeowners’ ability to make their mortgage payments could not be more apparent.”
If you are struggling to make your mortgage payment due to the crisis of the coronavirus pandemic, you are not alone.
When is a mortgage payment considered late?
If you have a traditional mortgage, your payments are likely due on the first of the month. Most mortgages include a 15-day grace period in which you can turn in your payment without it being considered “late.” While it is acceptable to make a payment within the grace period and not receive a penalty, it is not recommended. Receiving a delinquency can have serious consequences.
What Are the Consequences for Making a Late Payment?
Making a payment after the 15-day grace period will simply lead to a late fee, while waiting until 30 days after the due date to make a payment will additionally affect your credit score. The level of effect this late payment has on your credit score will depend on many factors such as the initial credit score number, how many late payments you have previously made, or how long you wait before finally making the payment. Someone with a higher credit score will experience more damage to their overall number than someone with a lower credit score. A late payment will stay on your credit history for 7 years. Your credit score may not be on the forefront of your mind when faced with a global pandemic, but letting this number fall could have detrimental effects in the future on other large purchases.
Forbearance Could Be an Option
For the 70% of homeowners with a mortgage supported by a government entity, the CARES Act gives you the right to a forbearance upon request until December 31, 2020, or 60 days after the termination of the federal national emergency, whichever comes first. This could grant you up to 180 days or more of payment deferral without incurring late fees or delinquency. In order to receive this forbearance, it must be requested. It is not automatically granted.
Mortgages that are backed by Frannie Mae, Freddie Mac, Veterans Affairs, The U.S. Department of Agriculture, and FHA are all federally held. If your mortgage is not federally held, some lenders are still granting forbearance due to the unprecedented circumstances faced by many homeowners. The specifications of a forbearance through a non-federally backed mortgage will differ depending on the lender. If your lender does not grant a forbearance, you may be protected by a moratorium, or temporary suspension, of foreclosure. Again, this has only been enacted for all government backed mortgages due to the CARES Act, and if you do not have one of these loans a moratorium is decided by your individual lender.
While forbearance can be a great way to grant more time to settle your finances, the deferred payments will eventually have to be paid off. Relying on forbearance or a moratorium to survive financial hardship provides only a temporary solution. If you are struggling with your mortgage payment, it might be a good idea to seek out a forbearance and use the break in payments to consider your options. One solution to escaping the weight of a burdensome mortgage is to sell your home to a professional home buyer.
Consider Selling Your Home to a Cash Buyer
The benefit to selling your home to a professional home buyer is that you can receive a cash offer and close on your home in a timely manner. Most professional home buyers will purchase your home in any condition, despite damage. Selling your home for cash also avoids having to deal with a real estate agent and home showings. In addition, you could escape any consequences to your credit score or taxes caused by late payments.
If you are a Massachusetts homeowner faced with financial hardship due to the coronavirus and are considering selling your home, reach out to Pavel Buys Houses to discuss your options. We are dedicated to offering the best possible cash price for your home so you can avoid the penalties and fees due to late payments. For more questions, or to ask us how to sell your home, call us today!
Be sure to check out other related resources specific to home ownership and the COVID-19 pandemic:
- COVID-19 Relief Options for Homeowners
- Can My House Still Be Foreclosed During COVID-19?
- Unable to Make Mortgage Payments? Here’s What You Need to Do
- Is Selling a House During the COVID-19 Pandemic a Good Idea?