This article was originally published in the May 2020 issue of Georgia Mountain Laurel magazine. To view the full publication, click here.
Tips to Protect Your Financial Health in the Age of Coronavirus
By: James W. Hurt, Jr.
In most of our lifetimes, we’ve not seen anything like the COVID-19 pandemic that has brought much of our day-to-day life to a grinding halt. Almost everyone on the planet is concerned for their physical health and well-being. But, you should also be concerned about your financial health in these uncertain times. Here are a few tips I’d like to share on how you can proactively protect finances and credit health.
Protecting Your Home
The recently passed CARES Act provides foreclosure relief for those with federally-backed home loans, which account for about 70% of all American mortgages. Under the Act, homeowners are entitled to request forebearance on their loan for an initial period of 180 days. Forebearance means “the action of refraining from exercising a legal right, especially enforcing the payment of a debt.” This means that during those 180 days, you would not be required to make your usual mortgage payments, and no fees, penalties, or interest would accrue on your loan beyond the terms of your contract. In addition, you have the right to renew for another 180-day period at the end of the initial term. If you think you may not be able to pay your mortgage in the coming months, I urge you to look into this program. To determine if your mortgage is backed by Fannie Mae or Freddie Mac, two of the largest backers of federal loans, visit www.makinghomeaffordable.gov, click the option for Get Answers, then Find Out Who Owns My Mortgage.
If you find that you do not have a federally-backed home loan, talk with your lender. Some banks and mortgage lenders are approving these types of programs on a case-by-case basis even though they are not required to do so. Finally, and of utmost importance to note, is that this is not a mortgage forgiveness plan. You will still be expected to pay the full amount of your loan, but you may be allowed to skip payments during this period so as not to cause unnecessary hardship on you or your family. Whether your mortgage is federally-backed or not, you will need to work with your lender to set up the forebearance and the terms for which you will repay the missed payments.
Protecting Your Credit
Consumer Credit Cards
Federal regulators are encouraging banks and other lenders to work with customers to meet their financial needs, including waiving certain fees, increasing credit limits, and offering accommodations for temporary hardships due to COVID-19. I have found while paying my own monthly bills, that a few consumer credit card companies such as Chase, Citibank, and American Express have notices at the top of their websites asking if you have been adversely affected by the pandemic. If you find that you are having trouble paying your credit card debt, follow the prompts online to send a secure message to your lender. If you don’t have online access, call the customer service number on your current bill. It is my hope that if you take advantage of their offers to help upfront, you will be able to keep from defaulting on your accounts.
Federal Direct Loans and Federal Family Education Loans (FFEL) will have payments suspended through September 30, 2020. If you have one of these types of student loans, you should have received a letter postmarked in April 2020. While the payments are suspended, the loans will not accrue any interest and will be treated as if payments had been made. In addition, the suspension period will have no negative impact on your credit report. If you don’t have a Direct or FFEL loan and feel you may have trouble making payments, contact your lender and try to negotiate a payment hiatus or other terms.
The bottom line is not waiting to take action. With a few proactive steps, you may be able to keep your home loan, credit cards, or student loan bills current so that you can resume normal life when this pandemic ends. Stay safe out there.
James W. Hurt, Jr. (Jimmy) is the principal and managing partner of Hurt Stolz, PC, a consumer protection and personal injury law firm serving the state of Georgia from Athens and Clayton offices.