We’ve been getting a lot of questions related to this COVID-19 Coronavirus pandemic and the CARES Act. I wanted to take a moment here to share with you what I know, and try to give you some information that will be helpful as you navigate your financial situation during these novel and challenging times. I am going to talk about both the income and the expense side of the equation. Let’s start with expenses first, because some of the main questions I’m getting deal with paying mortgages and rent and foreclosures and evictions. So let’s start with those of you who own your home and have a mortgage.
Mortgages & Rent
The federal CARES Act is requiring all lenders for federally-backed mortgages to give you a 180-days (6 months) forbearance, which can be extend for another 6 months for a total of a year. Now there are a couple issues with this. First, federally-backed, what is that and how do I know? Well essentially if you’ve got an FHA, VA, USDA, Fannie Mae, Freddie Mac, it’s federally backed. You should contact your mortgage lender directly to find out if your mortgage is federally backed. Here is a government website that can also help you find out if your mortgage is federally backed: https://www.consumerfinance.gov/ask-cfpb/how-can-i-tell-who-owns-my-mortgage-en-214/.
Most loans are federally backed, about 2/3s of them. If you have a conventional loan, it’s probably not federally backed, and so this 180 days forbearance doesn’t apply to you. Great, so say you’ve got a federally backed mortgage, what does that mean for you? Well that means you can get 180 days forbearance if you request it. The forbearance means that you can stop making payments for 6 months, but you’re going to have to pay it back as soon as the forbearance ends. No guidance on how you will have to pay it back, it will be up to your mortgage servicer. They could make you pay it right away, or they could make you pay it over time. What to do if you want to request this? You can simply call your lender and request it. However, I recommend a certified letter to your mortgage servicer stating that you are experiencing a hardship due to COVID-19 and you are requesting the forbearance. Then before the 6 months ends, send another letter requesting the extension. Always want to have that paper trail.
Here’s a helpful video from the Consumer Financial Protection Bureau (CFPB) on the CARES Act forbearances: https://youtu.be/br5EPugsnLs.
Now about foreclosures. The CARES Act put a moratorium on foreclosures until May 18th, 2020. For Georgia, this means no foreclosures until the first June foreclosure date. Unlikely to happen though until July. Note this applies ONLY to federally backed mortgages. However, as a practical matter, no foreclosures are going to be happening right now, and here’s why: foreclosures in Georgia take place by auction at the courthouse steps. Because of the quarantines announced by the various cities, counties, and Governor Kemp, public gatherings like that cannot take place right now. So no need to worry about foreclosure at least until the quarantines are gone.
Rent
Okay, now let me talk to those of you who rent. Unfortunately there hasn’t been a great deal of legal protection for renters. The CARES Act doesn’t really address it for the majority of renters. My recommendation is try your best to pay your rent. The only benefit you’ll get right now is a practical one. Because all the Georgia courts are on lock-down, it’s become very difficult to get cases filed and new eviction cases are not being scheduled for hearings. Thus, practically speaking, you’re not going to get evicted right now. And then once the quarantine releases, there’s going to be quite a backlog of cases, so evictions will be happening pretty slowly for some time. My best guess would be there won’t be many evictions at all in the next three months, but after that they will probably start happening again. And if you’ve gotten several months behind on rent, you can expect an eviction to be looming.
So bottom line, what should you do? If you want to keep your house or apartment you need to try to prioritize paying your mortgage or your rent. Put other bills, especially things like credit cards and medical bills, at the bottom of the pile. Let those go before you let your mortgage or rent payment go. But you say, I can’t pay, what do I do? Well, let’s talk about the income side.
Stimulus Checks & Unemployment
Okay, first, the stimulus checks. Everybody is wondering about these, where are they? Well, for some of us, they’ll be coming pretty quickly. If you’ve filed your taxes and gave the IRS your bank account info for direct deposit, you’ll be getting the stimulus money first. I’m hearing these will be coming by the end of April. You’ll get $1200 per adult and $500 per kid. I’ve got 4 kids, so I’m getting a total of $4,400.00. (Of course there are income limits to this). For those of you who haven’t filed your taxes, the IRS will give you instructions at some point on how to register, but you should definitely get your 2018 taxes filed ASAP. You DON’T NEED TO DO ANYTHING TO GET THIS MONEY! Watch out for scams. If anyone tells you to do something or give them info to get this money, it is a SCAM!
For details on the stimulus checks, the best source of information is straight from the IRS: https://www.irs.gov/coronavirus-tax-relief-and-economic-impact-payments.
Unemployment
Next, unemployment. You get unemployment from the Georgia Department of Labor. If you had a job, and you lost it due to COVID-19, you should apply for unemployment immediately. You may only get a small amount right now, based on your pay, but as soon as it gets released by the federal government, you’ll be getting an extra $600/week, and that amount will be retroactive. If you’re self-employed or a gig-worker, you’ll be able to apply soon and get the $600/week. Right now the Georgia Department of Labor is saying you can apply on April 13, 2020.
For details on unemployment, go straight to the Georgia Department of Labor website: https://dol.georgia.gov/gdol-covid-19-information.
Small Business Administration Loans/Grants
Finally, there are two types of loans/grants that are being offered by the Small Business Administration, SBA, for small businesses. The first is the Economic Injury Disaster Loan. You can apply for this directly through the SBA and get at least $10,000.00 which, if used for payroll, will be forgiven. The 2nd is the Payroll Protection Program Loans. These loans you apply for with your bank, so you’ll want to go to the bank where you have a business bank account to apply. You can apply to receive 2.5x your average monthly payroll for 2019. So to make it simple, if you had a total of $60,000.00 of income for 2019, your average monthly is $5,000.00. That means you’d qualify for a PPP loan of $12,500.00. Again, for this money, it’s a loan, but if you use it for payroll in the 60 days after you receive it, it’ll be forgiven.
The big question is who can get these loans? Well good news, these are available to sole proprietors and independent contractors. So if you’re self-employed, you should apply. How to apply? For the EIDL, go to the SBA website and fill out an application. Simple as that. The only problem is they are supposed to give out the money within 3 days of the application, and that’s not happening. No word on when the money will be released. You can apply for both. But keep in mind if you get the $10,000.00 EIDL, and then you get the PPP, you’re going to have to pay back the EIDL. You can’t keep both.
To apply for the EIDL, go directly to the Small Business Administration website: https://www.sba.gov/page/disaster-loan-applications.
To apply for the PPP loan, go directly to your bank.
Additional Resources
The National Consumer Law Center has put together a comprehensive list of major consumer protections announced in response to COVID-19 nationwide. This is a very helpful in-depth resource if you have additional questions about what protections and relief are available to you during the pandemic. They also update it pretty much every day with new developments. Here is the link: https://library.nclc.org/major-consumer-protections-announced-response-covid-19.
Final Notes
So bottom line here, is do your best to make those mortgage and rent payments. Apply for all the government assistance that is available. Hopefully we’ll start seeing this government money coming through soon and that will allow you to keep payments current. Keep credit cards, personal loans, medical bills, and other unsecured debt payments as your lowest priority. Remember that even if you end up accumulating substantial debt during this crisis, you can always potentially file bankruptcy and wipe out all your unsecured debt and get a fresh start. We give a FREE consultation for those considering bankruptcy as a possible option. If you’re struggling with a heavy debt load, don’t hesitate to give us a call.
