Which Government Programs Are Ending?

Since March 2020, a combination of various government programs have held off financial crises for American families.  But on Saturday, July 31st, two of those programs ended: (1) the foreclosure moratorium, which prevented foreclosure of federally-backed mortgages, and (2) the eviction moratorium, which prevented landlords from evicting tenants who were unable to pay rent due to Covid-19 hardships.

A third program – the mortgage forbearance program – will expire at the end of September, which is potentially terrifying news for the over 7 million American homeowners who accepted mortgage forbearances to either stop or delay mortgage payments during the pandemic.  While it may have made sense during the peak of the pandemic, the forbearance is by definition a temporary solution, and for many homeowners, it may have done more harm than good.  Today, many homeowners who enrolled in a forbearance program are months behind on their mortgages – and owe several thousands of dollars – without any real idea of how to deal with that problem.

There are options available, but it has become exceedingly difficult to figure out what those options are.  One government program “requires or encourages” your mortgage lender or servicer to consider a “monthly payment reduction” of up to 25% of the principal and interest portion of your mortgage payment.  Other servicers are offering to defer the back payments to the end of your mortgage without accruing additional interest, but that is just kicking the can down the road.  

The US Department of Treasury has allocated almost $10 billion to assist struggling homeowners who experienced a financial hardship after January 21, 2020 and earn 150% or less of the state’s median income, which eliminates a significant percentage of the population who earns “too much” but still isn’t back to earning its pre-pandemic income.

Rental Assistance Program

Renters are not much better off.  There is a federal Emergency Rental Assistance Program, but it has largely been allocated to the states to manage, and tenants may have to go through their cities or counties offering separate local assistance.  In Virginia, the program prioritizes households who are currently facing eviction and/or whose income is at or below 50% of the average median income and/or with an adult who has been unemployed more than 90 days.  Just like the financial hardship criteria discussed above for struggling homeowners, these parameters eliminate many tenants from consideration.

Considering Bankruptcy

For those of you who feel like the remaining government programs have left you behind, talk to a bankruptcy attorney for assistance.  Bankruptcy can give you more time to catch up on the back payments and still keep your home.  And if your job or family situation has changed and you’re ready to walk away, bankruptcy can help you now, while also preventing your creditors from coming after you again in the future.  

Whether you own or rent, you are likely one of the millions of Americans who have racked up credit card debt in order to keep the lights on and keep food on the table during the Covid-19 pandemic.  If you were diagnosed with Covid-19 – and certainly if you ended up in the hospital – you may also have astronomical medical bills.  No matter what specific issue has you feeling in over your head, you should contact Dunlap Law for a free consultation.

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