By Joanne Cleaver
As Americans emerge from sheltering in place, the privacy view from the front door may still be foggy.
Grace periods that allowed homeowners and renters to skip, reduce or delay monthly housing payments won’t last forever.
But the financial fallout might, housing-finance experts told Digital Privacy News, might force Americans to reveal more personal data than ever to restructure their own housing stability.
The extra $600 a week in unemployment compensation flowing from the federal CARES Act expires next month.
While Congress debates an extension, renters and homeowners have only a few weeks to rally a longer-term strategy to protect their credit reputations while negotiating payment terms.
“If your accommodation ends in July — and you don’t have arrangements for August about how to start making payments, you’ll get a negative repercussion on your credit report,” Noelle Carter, CEO of Consumer Credit Counseling Service of Buffalo Inc. (CCCS), told Digital Privacy News.
Carter was referring to the potential reduction in extra income that could further tighten many household incomes.
“If your accommodation ends in July — and you don’t have arrangements for August …, you’ll get a negative repercussion on your credit report.”Noelle Carter, CCCS, Buffalo, N.Y.
Now is the time to negotiate a longer-term plan to catch up on delayed or reduced housing payments, said Carter, especially to ensure that the agreed-on plan is not accidentally spilling onto your credit report.
Lenders, Landlords Benefit
CARES applies directly only to lenders and landlords whose portfolios and properties are linked to federal oversight or programs.
Still, other landlords and lenders have taken their cues from the law and have allowed renters and mortgage holders to negotiate reduced or missed payments — for the moment.
But lenders, landlords and credit-reporting systems are overwhelmed with requests for renegotiating terms, so individuals must work to ensure their credit reports reflect agreements for new terms.
CARES allows consumers to check their credit reports weekly at AnnualCreditReport.com, the only official website that allows free credit reports.
Shielding your credit report from the rolling damage of the pandemic’s economic slowdown is essential for keeping your current home or finding a new home, whether moving up or scaling back.
Though CARES requires some lenders to keep negotiated loan or lease terms to themselves, no such demands are made when renewing your lease, pursuing a new rental, refinancing your house or seeking to buy a new house.
At that point, credit reporting snaps back to normal.
Navigating the Maze
The overlapping effects of housing-payment forbearance programs could test the patience of a saint, housing-credit experts tell Digital Privacy News.
Even as Congress refines aspects of CARES, many companies remain unclear on how to implement the federal law.
Meanwhile, states and municipalities have adopted their own foreclosure and eviction-prevention measures, housing experts said, further complicating the exact guidelines for any given household.
Individuals must figure out what rules and protections most likely apply to them, and they must ready themselves for grueling rounds of financial disclosures as they negotiate the terms of staying or finding a new place.
“You have to find out the source of funding to your unit,” Jane L. Edmonstone, senior supervising attorney over housing for Community Legal Aid (CLA) in Massachusetts, told Digital Privacy News.
“There are layers of subsidies and funding — and that’s not always easy to find out,” she added. “Even when you figure it out, it’s not clear what it means.”
Staying Up on Payments
Overall, homeowners appear to be staying current. Data from property data-analytic firm CoreLogic, in Irvine, Calif., found a slight rise in past-due mortgages in March — though overall U.S. foreclosures are maintaining their lowest levels since June 2000.
Keeping up or catching up with your current mortgage is not supposed to affect your credit score under CARES, Richard Tucker, senior vice president for loan operations at Waterstone Mortgage Corp., told Digital Privacy News.
But CARES protection from pausing or partly paying your mortgage only applies to homeowners whose mortgages are held in the portfolios of Fannie Mae and Freddie Mac, the secondary housing-finance lenders, which report to federal authorities.
Mortgages held by private lenders are not covered by CARES.
Talking to Lenders
Confused homeowners naturally call the lender from whom they originally obtained the home loan, Tucker explained, and that lender then must coach homeowners in how to ascertain what protections cover them.
“We can’t require evidence (of financial hurt from the pandemic), but we have to ask questions about why the consumer is making the request,” Tucker said.
CARES also bars credit bureaus from reporting late mortgages if you are formally in forbearance with your mortgage lender, but the protections do not cover refinancing or buying a new house.
With mortgage rates still at all-time lows — fixed-rate, 30-year mortgages were at 3.38% last week, according to Bankrate.com — refinancing is booming.
“We can’t require evidence, but we have to ask questions about why the consumer is making the request.”Richard Tucker, Waterstone Mortgage Corp.
But to refinance, homeowners must provide proof of faithful loan repayment.
If you have been in forbearance because of COVID’s economic fallout, you must get back on track with at least three months of full, on-time mortgage payments just to begin a conversation on refinancing, Tucker said.
Expect to explain and document why you asked for forbearance and why a new lender should trust you with a new loan.
Forbearance may not appear on a credit report, but it does in your lender’s reports, which a new lender will scrutinize.
“We know,” Tucker told Digital Privacy News.
Work for Renters
Renters face a similar paper chase if they want to solidify their cases for claiming protection from eviction, said CLA’s Edmonstone.
“We passed these laws quickly and there’s confusion: Exactly, what kind of proof do you need to show that you lost income due to COVID-19?” she said.
Precise rules vary by municipality and by state, complicating landlords’ understanding of what power they have and what information they can demand, Edmonstone added.
In Massachusetts, for instance, “If you’ve faced a loss of income because of COVID-19 — and you let them know in the month that rent is due — they are not allowed to charge you a late fee or create a negative credit report or start eviction, but that doesn’t mean you are relieved of paying rent,” she told Digital Privacy News.
Paper Trail Necessary
As with home mortgages covered by CARES through federally backed secondary-finance companies, renters who live in tax-subsidized housing might have more protections against eviction, depending on the source of their landlords’ funds.
Often, apartment complexes are financed with federal, state and local tax credits and subsidies, but renters still must find out exactly how those subsidies translate to renter protections and rights, Edmonstone said.
Keep detailed notes about communications with landlords to make your case or have plenty for a consumer advocate to work with, advised Edmonstone and CCCS’ Carter.
A paper trail will be necessary to correct errors turning up on credit reports, Carter said, noting that she’s hearing about negotiated terms eluding the CARES protection and popping up on reports.
“Keep everything,” Edmonstone told Digital Privacy News. “Document everything.”
Joanne Cleaver is a business writer in North Carolina.
Sources (external links):
- Annual Credit Report: Home Page
- Freddie Mac: Loan Look-Up Tool
- Bankrate: Mortgage Interest Rates