Servicers treating government shutdown like a natural disaster
As the government shutdown enters its third week, mortgage servicers are activating the response plans they normally use during hurricanes and wildfires to assist federal workers who may have trouble paying their mortgages.
On Jan. 4, the president said he's prepared to keep the shutdown going for "months or even years." With that kind of ambiguity surrounding Washington, federal employees need fallbacks for their mortgages.
The shutdown impacts nearly 800,000 government employees. About 420,000 are currently working without pay and 380,000 are furloughed and not working at all.
During the shutdown in 2013, the FHA, Fannie Mae and Freddie Mac all called for temporary postponement on mortgage payments for furloughed workers. Lenders are offering paycheck loan assistance programs this time around.
Credit unions like Navy Federal and PenFed, are providing 0% APR loans for impacted members who have established direct deposit accounts with them.
"Our members deserve peace of mind during a government shutdown, and eligible members can register to get some relief," Tynika Wilson, Navy Federal senior vice president of debit card and fund services, said in a press release.
Mortgage servicers offer forbearance to bridge the gap.
"LoanCare is working with customers who have been impacted by the federal government shutdown, which may include normal forbearance or other relief," Tim O'Bryant, senior vice president of customer experience at LoanCare, said in a statement to National Mortgage News.
"Mortgage servicers can offer assistance, such as forbearance, to customers who are struggling to make their mortgage payment. Federal government employees who will experience difficulty paying their mortgage due to delays in receiving a paycheck should contact their mortgage servicer to discuss assistance options," Ruth Green, the chief operating officer of Primary Residential Mortgage, said in a statement to NMN.
Loan applications already dropped in light of the market uncertainty. With those furloughed technically being unemployed, it presents problems at the closing table with the documents required, including recent paystubs and employment verification.
"We are providing flexibilities, where possible, in order to assist customers in closing their transaction on time," Green continued. "The most significant impact is for customers in rural communities who have applied for USDA Rural Housing financing. At this time USDA is not issuing commitments that allow lenders to close these transactions."
If the shutdown does drag out, companies should stay proactive in assisting struggling homeowners.
"In the event the shutdown looks like it will persist into February, we plan to do an outreach campaign to educate customers on the forbearance option. If a customer has a unique situation or special circumstance, our management team and loss mitigation department are ready to assist," said O'Bryant.