Odd Reasons Why Millions Of Americans Cannot Qualify COVID Relief

When the coronavirus pandemic took its toll on the labor market, millions of homeowners struggled to pay their mortgages. The US Congress passed a bill which was signed into law by US President Donald J. Trump, Coronavirus Aid, Relief, and Economic Security Act or otherwise known as the CARES Act. 

The CARES Act offered 12 months mortgage forbearance for COVID-19-impacted borrowers with federally backed residential mortgages. These qualified borrowers comprise about 70% of all 48 million American homeowners with a mortgage. 

The question is – what happens to the 30%? Are they not qualified?

Karan Kaul, Senior Research Associate in the Housing Finance Policy Center at the Urban Institute, explained that the 30% have their mortgages in private loans. 

They do not automatically qualify simply because their mortgages are in private loans. 

Therefore, only those federally-backed loans are instantly qualified after being able to show proof of financial hardship due to COVID-19. There are about 14.6 million borrowers on private loans who could be vulnerable to the economic devastation caused by COVID-19. While the government wants everyone to take advantage of the COVID-19 mortgage relief, it could become challenging given the reasons below.

1. Lack of Standardization. Private lending sectors lack standardization and clarity as to who  holds the legal authority to decide the terms of loss mitigation. The governing contracts may provide direction concerning loss mitigation, ambiguous language in the contracts may cause different interpretations.
2. Lack of Specificity. Private agreements dictate what the servicer is allowed to do but often lack specific information that may help address unforeseen circumstances like this COVID-19 pandemic.
3. Servicer contractual obligations. Private servicers have a contractual obligation to the investor that may be in conflict with doing what is right for the borrower in providing CARES Act–type forbearance. 

These are the same challenges encountered by the government in servicing private loans back in the Great Recession that caused significant harm to homeowners. We must learn our lessons back in the Great Recession and Analytics Before Foreclosure is here to help homeowners fully understand their options before the nightmare of foreclosure happens.

If you have a private mortgage and running into these senarios or if you would like to get ahead of the curve when forbearance ends, get in touch with Analytics Before Foreclosure at  866-857-5405 for a free discovery call.