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COVID-19 Update 8: Thoughts on the CARES Act, Planning for life after the pandemic

Marc Dann

By

Marc Dann - Marc Dann Consumer Fraud & Foreclosure Defense AttorneyI was mildly enthusiastic about the CARES Act immediately after it was passed because it appeared to be substantially different from the stimulus plan crafted by the federal government during the Great Recession of 2008.

That package funneled trillions of dollars to the big banks and Wall Street speculators whose unfettered greed nearly destroyed the world’s financial system but did relatively little to help working and middle-class families devastated by the collapse of the housing market. By the time the economy began to turn around 10,000,000 of them had lost their homes.

By contrast, the CARES Act appears to direct $937 billion in aid to where it’s needed most: into the pockets of the more than 20,000,000 million Americans who are now unemployed and the bank accounts of small business owners who are literally hours away from losing everything they have built.

Sure, Congress doled out hundreds of billions of dollars to corporate America, including the airlines who have been ripping off travelers for decades, but the stimulus checks, enhanced unemployment benefits, and small business loan programs funded by the Act will help millions of people weather the Covid-19 storm—at least for the next couple months.

While it appears that Congress got a few things right, there are holes in the legislation that could negatively impact consumers, homeowners and small business owners. In this update I’ll identify the gaps and provide advice on who to deal with or avoid them.

Problems with the Paycheck Protection Program 

As I mentioned earlier, hundreds of thousands of small businesses across the nation are about to go under. The Paycheck Protection Program (PPP) is designed to help keep them afloat by providing forgivable loans owners can use to pay expenses including employee wages, rent, and utilities.

In concept the program is great. In practice, not so much.

That’s because the nationally chartered banks and SBA approved lenders charged with administering the program are permitted to pick and choose which applications to accept and in what order. As a result, they’ve been playing favorites. Business owners who have an existing relationship with a PPP lender go to the front of the line. Those who don’t, including minorities, are shoved to the back—if they’re able to apply at all. I’m sure you won’t be shocked to learn that Wells Fargo and other large financial institutions are telling smaller customers to hit the road and “try other banks.”  Publically owned Ruth’s Chris Steakhouse just announced that they alone sucked up $20 Million of the funds appropriated.

This type of discrimination is especially troubling in light of the fact that  Congress did not appropriate enough money to meet the needs of all the small businesses that are in trouble. When the money runs out, thousands of hard-working entrepreneurs and their employees will be doomed simply because they couldn’t access the help they were promised and desperately need.

We launched an investigation into this situation after being contacted by frustrated and infuriated small business owners. If you think something is wrong with the way a lender is handling or, more to the point, not handling your PPP application, please give us a call or email me at [email protected]

On the positive side, a number of clients have told us that smaller community banks are eager to process PPP paperwork. We’re not surprised. Over the years we’ve learned that community banks are extremely responsive to the needs of small borrowers. If you’ve been unable to make headway with a large lender, I encourage you to contact one of the community banks listed here.

Stimulus Checks can be hijacked by Judgment Creditors and banks

Stimulus checks funded by the CARES Act are already being deposited in the bank accounts of millions of Americans. That’s the good news.

Here’s the bad news: The Act doesn’t prohibit private debt collectors from garnishing stimulus money. That means if you’re behind on debt payments and have an outstanding court judgment, a private debt collector can grab your stimulus check. Attorney Javier Merino, head of DannLaw’s New Jersey office, along with consumer lawyers Josh Denbeaux and Ira Metrick just published an op-ed in the New Jersey Law Journal dealing with this issue.

If you fall in this category you should keep a close eye on your bank account and withdraw the money as soon as it is deposited. To stay one step ahead of judgment creditors you can track your stimulus payment here.

Here’s more bad news: if you owe money to the bank where your stimulus payment is being direct-deposited the bank can grab it. For example, if you have a bank account that’s been overdrawn, and your stimulus payment is deposited into that account, the CARES Act does not prevent the bank from taking part or all of the stimulus payment to pay back the debt. So far J.P. Morgan Chase and Wells Fargo have said they will not seize stimulus funds. Bank of America, Citibank, and U.S. Bank have yet to clarify their positions.

Waiver of Federal Student Loan interest is in doubt 

Federal Student Loans servicers have not been completely transparent about how they are going to implement the six-month zero interest, zero-fee forbearance included in the Act. In addition, some observers speculate that Navient, Greatlakes, and Nelnet don’t have the technology needed to properly track accounts. If you are taking advantage of the forbearance program please pay close attention to your loan statements and contact DannLaw or other attorneys if you notice a discrepancy in your account.

The CARES Act does not provide relief for federal loans originated before 2005 and private student loans 

The CARES Act does not provide forbearance for federal student loans originated before 2005 that were not consolidated or private student loans. If your loan falls into these categories you must continue to make your payments. If you are unable to do so, contact your servicer in writing and request a modification, forbearance or another type of accommodation.

Monitor your credit if you are taking advantage of the mortgage forbearance provisions of the CARES Act.

As we’ve noted in previous updates, the CARES Act provides for up to 12 months of payment suspension/forbearance for borrowers with federally-backed loans owned by Fannie Mae, Freddie Mac or insured by the FHA, VA and the Department of Agriculture. To determine if you have a qualifying loan send a request for information (RFI) to your mortgage servicer. We’ve drafted a simple RFI you can use. To obtain a copy email us at [email protected].

Please remember forbearance isn’t forgiveness.  That means you may be subject to higher mortgage payments, escrow payments, and other fees when you begin making your payments after the forbearance period. If you do take advantage of the Act’s forbearance program you should look closely at your monthly statement to make sure it is correct. You should also subscribe to a credit monitoring service and check regularly to make sure your servicer is not entering negative information on your credit report. If you notice discrepancies contact us at [email protected] so we can help protect you and determine if you have legal claims that may entitle you to financial compensation.

Bankruptcy may be the solution to your financial problems 

My parents always encouraged me to hope for the best but prepare for the worst. Today, their advice is more valuable than ever before because the COVID-19 emergency is causing unprecedented damage to our economy and levels of unemployment not seen since the Great Depression. Study after study has shown that a majority of Americans would have a difficult time meeting their obligations for more than a month or two if they lost their source of income. The ongoing crisis has validated those studies.

The $1200 stimulus checks and small business loans may ease the pain in the short term, but when that money is gone many business owners and individuals will be forced to consider filing bankruptcy in the months ahead. And while many people are loathe to do so, bankruptcy protections may provide the best option for dealing with the devastation caused by the crisis—a crisis none of us created or could have anticipated.

The fact that the courts and collection activity are essentially shut down gives business owners and individuals a unique opportunity to closely examine their financial situation and begin planning for the future—including a future that includes bankruptcy. Doing so will put you in a good position to move forward once the crisis ends if you don’t have to file and will help ensure that bankruptcy provides the maximum protection for your family and your business if filing proves to be the best alternative.

If you would like to schedule a phone or video conference with one of our experienced bankruptcy attorneys to discuss your financial future and the options that are available to you, please email [email protected]  We are here to listen, to advise, and to help.

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Marc Dann - Marc Dann Consumer Fraud & Foreclosure Defense AttorneyMany of our clients are still sorting through the various types of assistance offered via the CARES Act and the various executive orders signed by the President and the governor of the state in which they live. But learning about the programs and benefits that are now available is only half the equation. The other: deciding whether it’s in your best interest to take advantage of them.

Making those decisions won’t be easy. The CARES Act itself is more than 800 pages long and the rules and regulations the federal government is developing to implement it are only making things more complicated. Throw in the things individual states are doing and you have a nearly impenetrable mass of guidelines, requirements, and instructions that would make any bureaucrat proud.

To help you cut through the mountain of red tape that’s wrapped around the various relief packages we’ll be conducting a series of free Facebook Live legal clinics beginning this week. During the live sessions, we’ll answer questions about the CARES Act and address consumer, foreclosure, and student-loan related issues.

To participate in the clinics, please visit and like the DannLaw Facebook page. The first session will begin on Tuesday, April 7, 2020 at 6:00 p.m. EDT and will deal with the Act and a wide range of issues. You may submit a question during the broadcast or submit questions in advance by emailing [email protected].

Our second free live legal clinic dealing with student loan issues will be broadcast on Thursday, April 9, 2020 at Noon EDT. You may submit questions during the show or in advance by emailing [email protected].

Right now, we’d like to share some of the insight and info we’ve been able to distill from the rapidly evolving situation:

Housing

Borrowers whose loans are “federally backed,” i.e. insured by the FHA, VA, or Department of Agriculture or owned by Fannie Mae, Freddie Mac are entitled to a 60-day payment suspension followed by 12 months of forbearance.

Forbearance is not Forgiveness. Borrowers who take advantage of this type of relief will eventually have to pay the piper.

If you have an FHA, VA, or USDA loan, the principal and interest deferred will be rolled into a zero-interest second mortgage when the forbearance period ends. This is known as a “partial claim.” In addition, your escrow payment will be recalculated so your mortgage servicer can recoup the payments for taxes and insurance advanced during forbearance. The bottom line: if you take advantage of this benefit, your payment will increase when forbearance ends. You can learn more about the FHA’s policies here.

Forbearance is even less attractive for borrowers whose loans are owned by Freddie Mac or Fannie Mae because it is unlikely that either will adopt borrower-friendly solutions similar to those implemented by the FHA, VA, and USDA. That means servicers will do one of two things when forbearance ends: demand a lump sum equal to one year of one year’s worth of mortgage payments or offer to modify the loan in an as-yet-unspecified way.  This uncertainty means you should think long and hard about taking advantage of the opportunity to defer payment of your Freddie or Fannie loan.

There’s also a lot of uncertainty regarding non-federally backed loans. No one knows if servicers will offer relief to borrowers who lost their jobs or experienced a loss of income due to the Covid-19 crisis. The only way to find out is to ask. When you do, please remember the guidelines we laid out for communicating with mortgage servicers and other creditors:

  1. Communicate in writing when you can.
  2. If you are unable to communicate in writing, record your conversation if it is legal to do so in your state. Recording is permitted in Ohio and New Jersey.
  3. Contact us to arrange a free consultation if you are uncomfortable with the information provided by your servicer. Rule of thumb: if something doesn’t seem right it probably isn’t. Don’t hesitate to protect yourself.

Student Loans

The CARES Act enables people with federal student loans originated or consolidated after 2005 to defer payments for six months. No interest or late charges will accrue during the deferral period.

Similar relief is not available to borrowers who have Perkins Loans, private loans, or federal loans that were originated before 2005 and not consolidated thereafter. You must continue to make your payments. The only good news: most courts are staying hearings for 60 to 90-days so borrowers have some time to work things out before having a judgment issued against them.

If your student loan is in the collections process please pay attention to any service of process or other court documents that you may receive. If you don’t understand something sent to you by a debt collector, law firm, or Court seek advice from DannLaw or another attorney.

Small Business Loans

Businesses with less than 500 employees are eligible for three programs:

  1. Payroll Protection Program a forgivable loan for 2.5 times the business’s monthly payroll. These loans are available from banks or other Small Business Administration (SBA) Lenders.
  2. SBA Emergency Loans are available to businesses under distress as a result of the COVID-19 Crisis. Ten thousand dollars of the loan amount is forgivable.
  3. SBA Disaster Loans are available to businesses located in states in which a Federal Emergency has been declared.

It’s important to note that the implementation of these loan programs has been disorganized and haphazard.  Banks have been slow to develop and implement their application process and many have limited applicants to existing customers.  In addition, the transfer of funds to the SBA Emergency and Disaster Loan programs has been moving at a snail’s pace. The roadblocks and delays are incredibly frustrating at a time when many small businesses need immediate help if they are to survive the crisis. We’re constantly monitoring the situation so we can help clients receive the assistance they need.

Please visit the SBA Website for additional information about these loans.

Scams:

All individuals and small businesses should be on the lookout for fraudulent and/or criminal behavior. Here are some warning signs:

  1. SBA backed Loans can only be originated by SBA Lenders. Make sure you are providing your information to an accredited SBA Lender. There are no fees associated with applying for these loans and most businesspeople should be able to fill out the relatively simple applications. If you need help only deal with licensed CPAs or attorneys.
  2. There is no fee to apply for the stimulus checks of $1200 or more per family that will be distributed under the provisions of the CARES Act. Indeed, there is no application at all. All you need to do is to verify that your most recent tax return has all of your correct address and bank account information.

You may view our previous updates here.

That’s it for now. Be well, stay safe and if you need help or information please call 877-475-8100 or email us at [email protected]

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Marc Dann - Marc Dann Consumer Fraud & Foreclosure Defense AttorneyNow that we’ve had additional time to review the CARES Act, we would like to share some clarifications and observations along with advice about how to deal with bills and other financial obligations that may be coming due on April 1.

Here are some things to consider about paying your bills:

1. Pay your bills if you can. You should take advantage of options that allow you to delay making payments if you need to, not just because they are available.

2. If you don’t have enough money to make your mortgage payment and pay your other bills, please consider the following factors before deciding how to allocate the funds you have:

3. First, consider the amount you owe on your home relative to its value. This is known as the loan to value ratio. If your home is worth more than your mortgage balance it is an asset that you should protect. If it is worth less than you owe it is a liability so your mortgage payment should be viewed as a housing cost and compared to alternatives like paying rent. You should also evaluate other factors including the state of the housing market in your neighborhood, the company that owns your loan, and whether you intend to sell your house sometime in the next few years.

As we noted in earlier updates, borrowers whose loans are “federally backed” can apply for up to 12 months of forbearance. But remember, forbearance is not forgiveness. At the end of the forbearance period you will owe the payments you did not make and you will most likely need to modify your loan. At this time, there is no way to determine what the terms of such modifications will be. In addition, if you pay taxes and insurance via your mortgage and the servicer has paid those costs on your behalf, your escrow payment may well rise substantially when the forbearance period ends. In either case, you could be looking at steep increases in costs when you begin making payments again.

4. If you are unable to pay your mortgage you are entitled to suspension/forbearance under these circumstances:

  • Your mortgage is “Federally Backed” and covered under the CARES Act which provides a 60-day suspension and 12 months of forebearance;
  • You live in New Jersey, California, New York. These states have issued blanket orders suspending mortgage payments.

5. If the investor and/or loan servicer that holds your mortgage is not legally obligated to offer suspension or forbearance you should contact them to determine if they are offering programs that will help you manage your payments. Consider taking advantage of them if they make sense for you.

6. Although the CARES Act prohibits negative credit reporting in the short term for borrowers who were not behind on their mortgage or student loans when the Covid-19 pandemic began, creditors are not prohibited from reporting negative information during and after the crisis. If you rely on credit you should take steps to prevent your hard-earned credit score from dropping.

7. Remember: NOTHING prohibits many creditors from pursuing debt collection during this crisis. Do not ignore legal notices you receive. If you do, a creditor could obtain a judgement that will enable them to garnish your wages and attach your bank accounts. Keep control of you finances by communicating with your creditors.

8. If you are married or cohabitate, it is important for you to talk to your spouse or partner about finances. Be open, honest and transparent about your debts and thoroughly discuss the options and choices available to you. Don’t add to the stress associated with the Covid-19 emergency by concealing financial problems from your loved ones until it is too late to deal with them. This is especially true if one person is primarily responsible for  paying the bills. In our experience, being less than forthcoming about your financial situation can be a relationship killer. Don’t let it happen to you.

9. If you are not going to pay a bill, please inform your creditor or mortgage servicer in writing. You should also ask them if they are offering programs or plans that will help you manage your debt.

Communicating with your creditors in writing is important for three reasons:

Reason 1: Employees at most companies are now working at home which means it could take hours to a, reach them and b, discuss the situation which means you may miss a crucial scene on Tiger King.

Reason 2: The only records of a phone call will be the notes taken by the creditor, which you will not be surprised to learn, will not be written in your favor.

Reason 3: We can tell you hundreds of stories about creditors who broke promises because they know no record of the promise being made exists.

So, please, please, please, make sure there is a written record of what you promise the creditor and what they promise you. If you are unable to communicate in writing, record the phone calls if it is legal to do so in your state. Ohio and New Jersey are both one-party consent states which means you can tape away.

If you want help thinking through your choices, our lawyers are available for free initial video or phone consultations call 877-475-8100 or [email protected]

Clarification on Student Loan Issues

In the last update we incorrectly reported that all Federal Student Loans were covered by the payment holiday. Unfortunately, we were wrong. If you have a Perkins Loan or an FFEL Loan it is not subject to the relief provisions of the CARES Act. In a nutshell, if you have a Federal Student Loan that originated prior to 2005 and you did not consolidate it later, your loan is not protected by the CARES Act at all.

We are particularly concerned about the collection of Perkins Loans. In Ohio these loans are collected by the Ohio Attorney General and have become controversial because outside counsel and debt collectors have used aggressive collection tactics and added exorbitant fees to loan balances. DannLaw attorneys Emily White and Brian Flick recently wrote to Ohio Attorney General David Yost and asked him to protect Perkins Loans borrowers during the crisis:

Because our firm represents people who accrued significant debt while attending Ohio’s state colleges and universities, we are particularly concerned about the impact the ongoing emergency will have on student loan borrowers. Many are saddled with tens of thousands of dollars in debt that will take decades to pay off.  Low income students who received Pell Grants and Perkins Loans are in a more dire position if they are forced to leave mid-semester due to financial, medical, or family difficulties: they must repay their loans and grants immediately.

To make matters worse, the tactics used by debt collectors and outside counsel hired by the Attorney General’s Office to pursue borrowers have become increasingly aggressive in recent years. Those tactics combined with the charges and fees added to balances, including the 30% surcharge outside firms have been authorized to charge since 2017, make dealing with student loan debt difficult during the best of times—and these are far from the best of times.

 In the weeks and months ahead it will become increasingly difficult for Ohioans to pay meet their financial obligations. Governor DeWine, the federal government, and many companies are taking steps to help cushion the blow. I urge you to join them by suspending collection actions and waiving interest and fees for the foreseeable future. I also ask that you consider supporting the creation of a hardship waiver process that will enable Ohioans to deal with the long-term effects of the crisis. At this time in our history, state government should not be the creditor Ohioans fear most.

If you have a chance please join us in urging Attorney General Yost to stand down on collection of Perkins loans and Pell Grants during this crisis by visiting this website: [email protected].

Clarification on Mortgage issue

 We incorrectly reported that credit reporting would continue on Federally Backed mortgage loans that are subject to suspension or forbearance under the CARES act. That is not correct. If you are current on the loan prior to taking advantage of the suspension or forbearance provision of the Act negative credit reporting is prohibited.

 Stimulus Checks

 One of the most significant features of the CARES Act are the payments of $1200 or more the vast majority of American Families will receive. But the Act does not prevent existing judgment creditors from attaching bank accounts into which the payments will be deposited. Pay close attention to which account the IRS has on record and direct it to an account that is not subject to attachment if you can do so. In addition, as has been widely reported, payments to people who have unpaid child support will be directed to their children.

Scam Alert

Anytime the government engages in significant action like the CARE Act charlatans and scam artists begin cooking up ways to cheat those who are eligible for help as well as those who are not. This happened repeatedly when the Federal HAMP program was created. Here are some bad actors you should avoid:

  1. Anyone who promises to help you access your stimulus money. There is no application for the stimulus money. Make sure the IRS has your accurate bank account and contact information and the checks will be sent directly to you.
  2. Anyone who promises to help you apply for mortgage or student loan assistance. If you are unsure or need help in deciding what to do about suspension or forbearance of mortgage or other debt only seek advice or help from an attorney licensed to practice law in your state.
  3. Anyone other than your lawyer or CPA who offers to help you access Small Business Assistance under the CARES Act.

If you sent money to someone engaged in a scam in order to profit from this crisis contact an attorney or law enforcement agency right away. Ohio and New Jersey have strong consumer protection laws that will enable you to seek and secure damages from cheaters and scam artists.

This information is not, nor is it intended to be, legal advice. You should consult an attorney for advice. We can be reached at 877-475-8100 or via email at [email protected] or [email protected].

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Marc Dann - Marc Dann Consumer Fraud & Foreclosure Defense AttorneyI’ve been involved in politics and government for over 40 years and I can say  definitively that I have not seen legislation that offers as much direct and immediate relief to distressed consumers, borrowers, small business owners and tenants as the Covid-19 stimulus package, known as the CARES Act that Congress passed on Friday, March 27.  You can read an analysis of the bill here. You can read the legislation in its entirety here.

While I’m generally pleased with the CARES Act, I do have two concerns:

First, I believe government, mortgage loan servicers and banks may make significant mistakes and cause undue delays as they implement the legislation, and, second, I worry that many mortgage, consumer, and student loan borrowers may not receive the assistance they will need to weather the Covid-19 emergency.

Here’s the bad news…

The Acts’ protections only apply to federally-backed mortgage loans.

If  you are among the more than 50% of homeowners whose mortgage is “federally related” i.e. owned by Fannie Mae, Freddie Mac or insured by the FHA, VA and the Department of Agriculture help, which I’ll describe later, is on the way. But many borrowers, including those who have recently been in default in recent years, are not eligible for relief because their loans are not owned by the listed entities. That means it’s very important to find out who owns your loan. We can help you find out or you can send a “Request for Information to your servicer. Many loans that were formerly owned by Fannie Mae and Freddie Mac or insured by the FHA have been resold. In many cases hedge funds that are not obligated to offer the forbearance of payments included in the bill now hold own the loans.

The Act does not address Private Student Loans.

If your loan is not owned by the U.S. Department of Education then you are not eligible for the 6-month, consequence-free payment holiday included in the Act. While some courts in some counties have placed stays on some collection activity, lawsuits and other collection actions involving private student loans may proceed.

The Act’s eviction protections for renters apply to a very small category of landlords

Landlords who have loans from Fannie Mae or Freddie Mac and who seek mortgage assistance are prohibited from evicting tenants. Unfortunately, the vast majority of landlords do not fall into this category.

It is important to note that the members of Congress did not carve out these exceptions because they don’t care about the people they impact. The exceptions exist because the federal government generally lacks the power to control the private creditors involved.   

Now for the good news—and there’s lots of it…

Mortgages:

Mortgage Servicers for Federally Backed Mortgages must provide a 60-day suspension of payment obligations to borrowers who claim they are unable to apy because they have been impacted they Covid-19 crisis.

Mortgage Servicers for Federally Backed Mortgages are required to agree to forbearance of up to 12 months or longer without adding additional fees, penalties or interest other than that contemplated by the original note. It is important to note, however, that the Act does not prohibit negative credit reporting during the forbearance period.

Servicers of Federally Backed Mortgages are prohibited from moving forward to foreclose or evicting anyone from now until May 17, 2020.

Student Loans:

All Payments on Federal student loans will be suspended for six months. More significantly, no interest, penalties, or fees will accrue during this time period.  The non-payments will be treated as payments for the purpose of forgiveness, loan rehabilitation or public service loan forgiveness programs.  In addition, the Act contains a very consumer-friendly provision that requires lenders to report the borrower as paying currently to credit reporting agencies. Remember these provision DO NOT apply to Private Student Loans.

Unemployment Compensation:

The Act adds $600 per week in federal unemployment benefits to the amount paid by each state. For many workers this means unemployment checks will nearly equal their normal wage. You must still apply through your state’s unemployment system.

Small Business Owners:

Small business owners can apply to banks or other SBS-approved lenders for loans to cover eight to ten weeks of expenses including payroll, rent, health insurance, sick pay and other day to day costs. The loan is forgivable if the business keeps its employees on the payroll during the period. Banks will originate and service the loans and the Government will subsidize them through the SBA. While $355 billion has been appropriated, based on my discussions with clients, the money may run out so we suggest that small business owners apply right away.

Bankruptcy Changes:

The following changes to the Bankruptcy Code will be in effect for the next 12 months:

The stimulus checks Americans receive will not be considered income for purposes of filing a Bankruptcy.

For those already in a confirmed Chapter 13 Plan, the Bankruptcy Code has been amended to allow for Debtor(s) to file a Motion to Modify their Chapter 13 based on financial issues caused by COVID to extend the term of their plan for up to 84 months/seven years.

The definition of Debtor for purposes of filing Subchapter V of Chapter 11 also known as the Small Business Reorganization Act has been expanded to include all debtors, not just those defined as a small business:

The following change to the Bankruptcy Code is permanent:

The debt limit for cases eligible to file under the new Small Business Reorganization Act under Chapter 11 (a.k.a. SBRA or Subchapter V) has been increased to $7,500.000.00

See Previous updates on this crisis and its impact on consumers here

For more information contact [email protected] or call 877-475-8100

Marc Dann

[email protected]

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Marc Dann - Marc Dann Consumer Fraud & Foreclosure Defense AttorneyWe hope that you, your family and friends are safe and in good health. We, like most of you who live in New Jersey and Ohio have been ordered to stay home for a while. We want to assure you that we are here to help you despite the Shelter-in-Place and Stay at Home orders. You may reach us at any time by calling 877-475-8100, emailing us at [email protected], or calling Marc Dann’s cell phone: 330-651-3131.

Like us, you probably know one of the hundreds of thousands of people who have lost their jobs or been forced to close their small business over the past two weeks. And it’s even more likely that you or someone you know has seen your retirement savings take a major hit as stocks have lost trillions of dollars in value.

The airwaves, print media, and internet have been flooded with conflicting reports about state and federal proposals designed to help Americans deal with the financial challenges caused by the Covid-19 crisis. Some proposals have been enacted, some are awaiting congressional or state legislative approval, and others aren’t detailed enough to discuss at this time. We know it can all be confusing for people who simply want to earn a living, feed their families, and pay their bills.

No one knows how long the pandemic or the financial devastation associated with the measures taken to deal with it will last. With that in mind, we strongly advise that you Proceed with Caution when dealing with your mortgage servicer, student loan servicer, and other creditors. While FHA, Fannie Mae, and Freddie Mac have issued directives that make many mortgage loans eligible for 12 months of forbearance, delaying payments can throw your escrow out of balance, cause interest and escrow advances to be turned into interest-bearing principal when a loan is modified, or make accounting more complicated.

And while it is critically important for you to communicate with your creditors if you are having a problem paying your debts doing so is becoming increasingly difficult as the employees who answer the phones at banks and lenders begin working from home.

That’s why we want to emphasize that we are just a phone call away and available to help you make decisions that could impact your credit and your financial security for years to come. Please do not hesitate to contact us—your future may depend on it.

For right now: If you can pay your bills, including your mortgage and student loans, do so.  If you are unable to pay, communicate with your loan servicer or creditor in writing if you can. If you must speak with them by phone, record the conversation. Advise the creditor of your situation BUT DO NOT AGREE TO A REMEDY. As we noted above, Congress and state legislatures are still considering proposals that may create favorable ways for you to deal with your obligations. Don’t repeat the mistakes people made during the collapse of the housing market. Many of our clients agreed to modify their loans during the early stage of recession and were unable to take advantage of more favorable remedies that became available later.

With that warning in mind, here’s what we know for sure as of today:

Mortgages

  1. New Jersey Governor Murphy has ordered that no one can be removed from their home pursuant to an eviction or mortgage foreclosure proceeding during a 60 day period beginning March 19 and ending May 18. Governor Murphy has also asked financial institutions including banks and mortgage servicers to “implement a process” to work with homeowners although they are not mandated to do so. It is also important to note that this order also does not prevent banks and servicers from filing and otherwise pursuing foreclosure actions in the state. But if you have a mortgage insured by the FHA or owned by Fannie Mae and Freddie Mac, FHFA and HUD are suspending ALL foreclosures and evictions for at least 60 days.
  2. Each county in the state is taking a different approach regarding sheriff’s sales. For example, Bergen County has cancelled sales for March 27 and April 3 but has not indicated what will happen after April 3. Middlesex County is tentatively scheduled to resume sheriff’s sales on April 1. Meanwhile, Essex County, Passaic County, and Hudson County have suspended their sales until further notice. So, if your home is scheduled for a sheriff’s sale you should immediately double check with your county’s sheriff’s office and ask if it will proceed or be delayed.
  3. Ohio has not implemented a statewide rule regarding foreclosures, but sales have been stayed for 60 days in Cuyahoga, Hamilton and Franklin counties.  Most courts have either continued or stayed cases or converted all court appearances to video conferences. If you have a foreclosure pending please keep in close contact with your lawyer.
  4. Here are links to all of the entities that are offering forbearance. Remember FHA, Fannie and Freddie sold off many of the their loans so even if your loan at one time was owned by Fannie or Freddie or insured by FHA these provisions may not apply to you.

Fannie Mae: https://www.fanniemae.com/portal/media/corporate-news/2020/covid-homeowner-assistance-options-7000.html

Freddie Mac: http://www.freddiemac.com/about/covid-19.html

FHA: https://www.hud.gov/program_offices/public_indian_housing/covid_19_resources

Federal Student Loans

  1. If you have a federal student loan, not a private loan, contact your loan servicer and request that you be allowed to suspend payments for 60 days. Interest will also be suspended for that time period. We again strongly recommend you communicate with your servicer in writing so that you have proof of what they promised you and you promised them. If you must communicate by phone, both Ohio and New Jersey are “one party consent” states which means you have the right to record your conversation with the service. We strongly urge you to do so.
  2. The Bad News on Federal Student Loans: Federal Student loan servicers may still garnish your wages, offset your social security payments, and take your upcoming tax return.
  3. You can find up to date information regarding federal student loans here.
  4. The Really Bad News on Private Student Loans If you have a private student loan you are out of luck at the moment. There are no programs or proposals to protect you if you are unable to make your payments. There is nothing to stop lenders from filing and pursuing lawsuits against debtors who are in arrears.