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What happens if I can’t pay my mortgage because of coronavirus?

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The pending coronavirus relief package will provide financial help for many Americans, including expanded unemployment benefits and stimulus checks.

But Americans like Paul Blank of Ridgewood are still worried about their bills.

Blank, a self-employed tech specialist servicing small computer networks, is afraid of missing a mortgage payment.

While he does a lot of work from home, “this pandemic has caused me almost entirely to stay home,” Blank said.

That means a lot of lost income.

When he contacted his mortgage lender — M&T Bank — to ask about a forbearance, which allows homeowners to defer mortgage payments without penalty, he was in for a surprise.

“I was flatly told that they would waive late payment penalties for 60 days, but the entire payment(s) would be due at the end of the 60 days,” Blank said. “When I mentioned changing the payment amount or loan length, they said, ‘we are not doing that.’”

Blank said he thought he’d be able to tack on the deferred payments at the end of his loan.

He decided not to take a deal for now because he said in the short-term, he can probably afford the payments.

“I was thinking that it would be good to preserve my savings until things are more back to normal to help out those family members who are worse off than I am,” he said. “And of course, the uncertainty about the future remains. My money will run out if this continues.”

It’s unclear if the stimulus package will streamline how forbearances work, but it’s expected to give lenders and borrowers more options.

If you’re afraid you won’t be able to pay your mortgage because of coronavirus, be proactive. Consider forbearance.

Here’s how it works.

WHAT IS FORBEARANCE?

Forbearance is the suspension of your mortgage payments. It’s not loan forgiveness, and you will eventually have to pay the skipped amounts back.

Right now banks and mortgage servicers are telling homeowners that they can suspend payments for three months, said Charles Richman, executive director of the New Jersey Housing and Mortgage Finance Agency (NJHMFA), which works with families on housing.

Both Fannie Mae and Freddie Mac loans will allow for 12 months of forbearance because of coronavirus.

Richman said while three months is standard, he thinks many banks will extend beyond that.

“There are people who are going to be out of work for more than three months,” he said. “At least here in New Jersey, the governor has suspended the ability to foreclose. It behooves the banks to work with homeowners to work out a plan of forbearance.”

SHOULD I GET A FORBEARANCE?

Before you examine your forbearance possibilities, you should take a hard look at your finances, including your income prospects and your available savings.

If you don’t need a forbearance to address cash flow issues, there is no point taking one, said Tendayi Kapfidze, chief economist for LendingTree.

“Your mortgage will continue to accrue interest while in forbearance,” he said. “This ultimately increases the total interest you pay over the life of the loan as interest is charged on higher amounts while in forbearance.”

“It’s not a costless option, so don’t do it if you don’t need to,” Kapfidze said.

HOW CAN I GET A FORBEARANCE?

To get a forbearance, you have to call your bank or mortgage servicer and ask for it.

The servicer will ask some questions to determine eligibility and may or may not request documentation, Kapfidze said.

“You may have to disclose all your income and assets,” he said. “If approved, the servicer will determine the length of forbearance and discuss the repayment terms with the borrower.”

WHAT ARE THE TERMS OF A FORBEARANCE?

Exactly what your forbearance will look like depends on your bank or mortgage servicer and what terms you both agree to.

It’s customary for the bank to expect a lump sum payment for your skipped payments at the end of the forbearance period, but there are other ways to do it, Richman said.

He said at the end of the period of forbearance, the lender will contact the homeowner to discuss what will happen moving forward.

“It could be a modification of the loan depending on the circumstances and why the person couldn’t pay. It could be a rate adjustment,” he said.

Another alternative is to spread the forbeared monies over the remaining length of the mortgage, which Richman said is the method that would have the least amount of impact on a homeowner.

It’s uncommon for a lender to agree to extend the period of the loan, allowing you to make the payments at the end of the original mortgage period.

It’s possible that legislators will establish requirements for lenders to follow for the payback methods, Richman said.

“We’re waiting for more federal guidance on this,” he said. “We’re still in this fog of war period.”

Before you come to an agreement with your lender, make sure you are comfortable with the repayment plan, and also ask about any late fees that could accrue.

WILL FORBEARANCE HURT MY CREDIT?

The experts we spoke to said because mortgage forbearance terms vary by lender, it’s possible that a forbearance could affect your credit. It really depends on whether your lender chooses to report it to the credit bureaus, so you should ask that question before you agree to a deal.

“Borrowers should be crystal clear with their lender about how their individual situation will be reported to credit bureaus so they know what to expect,” said Andy Taylor, general manager of Credit Karma Home.

Taylor said if it looks like you will probably be late or even miss a mortgage payment, a forbearance will help protect your credit.

“Late or missing payments will hit your credit harder than a forbearance would,” Taylor said. “Also, if you miss a payment, you may put your ability to take advantage of these programs at risk since a missed payment may disqualify you from many forbearance programs.”

ARE THERE OPTIONS OTHER THAN FORBEARANCE?

Before you enter a forbearance, see if you have other options to access cash.

Taylor said we headed into 2020 with record-high levels of home equity, so you might be able to find cash there.

One option is a cash-out refinance, which allows you to cash out the equity you’ve built in your home while hopefully locking in a lower interest rate, Taylor said.

Or you could apply for a home equity line of credit (HELOC), which is a revolving line of credit against the equity of your home. You can secure a HELOC now, even if you don’t plan to use it immediately, Taylor said.

“For any home equity option, you should act fast given demand,” Taylor said. “Consider starting with a local credit union or small mortgage broker who might be able to act faster.”

HOW CAN I GET HELP WITH FORBEARANCE?

The New Jersey Housing and Mortgage Finance Agency urges homeowners to contact a housing counseling agency.

You can find a listing of agencies, which will provide services and advice, for free, on the NJHMFA website.

“These counselors will walk a homeowner through exactly what they should be saying to the bank, what they should expect to hear from the bank, and what they should say to negotiate with the bank on forbearance,” Richman said. “These are people who are trained and certified by the federal government.”

The counseling is available statewide and can be done remotely.

There’s also assistance for renters. Services include help with financial literacy such as budgeting and credit repair, fair housing rights, eviction diversion and relocation assistance.

LendingTree also offers these helpful guides on what to do if you can’t pay your mortgage.

Tell us your coronavirus stories, whether it’s a news tip, a topic you want us to cover, or a personal story you want to share.

If you would like updates on New Jersey-specific coronavirus news, subscribe to our Coronavirus in N.J. newsletter.

Sign up for text message alerts from NJ.com on coronavirus in New Jersey:

Have you been Bamboozled? Reach Karin Price Mueller at Bamboozled@NJAdvanceMedia.com. Follow her on Twitter @KPMueller. Find Bamboozled on Facebook. Mueller is also the founder of NJMoneyHelp.com. Stay informed and sign up for NJMoneyHelp.com’s weekly e-newsletter.



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Are Sallie Mae Student Loans Federal or Private?

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When you hear the name Sallie Mae, you probably think of student loans. There’s a good reason for that; Sallie Mae has a long history, during which time it has provided both federal and private student loans.

However, as of 2014, all of Sallie Mae’s student loans are private, and its federal loans have been sold to another servicer. Here’s what to know if you have a Sallie Mae loan or are considering taking one out.

What is Sallie Mae?

Sallie Mae is a company that currently offers private student loans. But it has taken a few forms over the years.

In 1972, Congress first created the Student Loan Marketing Association (SLMA) as a private, for-profit corporation. Congress gave SLMA, commonly called “Sallie Mae,” the status of a government-sponsored enterprise (GSE) to support the company in its mission to provide stability and liquidity to the student loan market as a warehouse for student loans.

However, in 2004, the structure and purpose of the company began to change. SLMA dissolved in late December of that year, and the SLM Corporation, or “Sallie Mae,” was formed in its place as a fully private-sector company without GSE status.

In 2014, the company underwent another big adjustment when Sallie Mae split to form Navient and Sallie Mae. Navient is a federal student loan servicer that manages existing student loan accounts. Meanwhile, Sallie Mae continues to offer private student loans and other financial products to consumers. If you took out a student loan with Sallie Mae prior to 2014, there’s a chance that it was a federal student loan under the now-defunct Federal Family Education Loan Program (FFELP).

At present, Sallie Mae owns 1.4 percent of student loans in the United States. In addition to private student loans, the bank also offers credit cards, personal loans and savings accounts to its customers, many of whom are college students.

What is the difference between private and federal student loans?

When you’re seeking financing to pay for college, you’ll have a big choice to make: federal versus private student loans. Both types of loans offer some benefits and drawbacks.

Federal student loans are educational loans that come from the U.S. government. Under the William D. Ford Federal Direct Loan Program, there are four types of federal student loans available to qualified borrowers.

With federal student loans, you typically do not need a co-signer or even a credit check. The loans also come with numerous benefits, such as the ability to adjust your repayment plan based on your income. You may also be able to pause payments with a forbearance or deferment and perhaps even qualify for some level of student loan forgiveness.

On the negative side, most federal student loans feature borrowing limits, so you might need to find supplemental funding or scholarships if your educational costs exceed federal loan maximums.

Private student loans are educational loans you can access from private lenders, such as banks, credit unions and online lenders. On the plus side, private student loans often feature higher loan amounts than you can access through federal funding. And if you or your co-signer has excellent credit, you may be able to secure a competitive interest rate as well.

As for drawbacks, private student loans don’t offer the valuable benefits that federal student borrowers can enjoy. You may also face higher interest rates or have a harder time qualifying for financing if you have bad credit.

Are Sallie Mae loans better than federal student loans?

In general, federal loans are the best first choice for student borrowers. Federal student loans offer numerous benefits that private loans do not. You’ll generally want to complete the Free Application for Federal Student Aid (FAFSA) and review federal funding options before applying for any type of private student loan — Sallie Mae loans included.

However, private student loans, like those offered by Sallie Mae, do have their place. In some cases, federal student aid, grants, scholarships, work-study programs and savings might not be enough to cover educational expenses. In these situations, private student loans may provide you with another way to pay for college.

If you do need to take out private student loans, Sallie Mae is a lender worth considering. It offers loans for a variety of needs, including undergrad, MBA school, medical school, dental school and law school. Its loans also feature 100 percent coverage, so you can find funding for all of your certified school expenses.

With that said, it’s always best to compare a few lenders before committing. All lenders evaluate income and credit score differently, so it’s possible that another lender could give you lower interest rates or more favorable terms.

The bottom line

Sallie Mae may be a good choice if you’re in the market for private student loans and other financial products. Just be sure to do your research upfront, as you should before you take out any form of financing. Comparing multiple offers always gives you the best chance of saving money.

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Tips to do some fall cleaning on your finances

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Wealth manager, Harry Abrahamsen, has five simple ways to stay on top of the big financial picture.

PORTLAND, Maine — Keeping track of our financial stability is something we can all do, whether we have IRAs or 401ks or just a checking account. Harry J. Abrahamsen is the Founder of Abrahamsen Financial Group. He works with clients to create and grow their own wealth. Abrahamsen shares five financial tips, starting with knowing what you have. 

1. Analyze Your Finances Quarterly or Biannually

You want to make sure that your long-term strategy is congruent with your short-term strategy. If the short-term is not working out, you may need to adjust what you are doing to make sure your outcome produces the desired results you are looking to accomplish. It is just like setting sail on a voyage across the Atlantic Ocean. You know where you want to go and plot your course, but there are many factors that need to be considered to actually get you across and across safely. Your finances behave the exact same way. Check your current situation and make sure you are taking into consideration all of the various wealth-eroding factors that can take you completely off course.

With interest rates very low, now might be a good time to consider refinancing student loans or mortgages, or consolidating credit card debt. However, do so only if you need to or if you can create a positive cash flow. To ensure that you are saving the most by doing so, you must look at current payments, excluding taxes and insurance costs. This way you can do an apples-to-apples comparison.

The most important things to look for when reviewing your credit report is accuracy. Make sure the reporting agencies are reporting things actuary. If it doesn’t appear to be reporting correct and accurate information, you should consult with a reputable credit repair company to help you fix the incorrect information.

4. Savings and Retirement Accounts

The most important thing to consider when reviewing your savings and retirement accounts is to make sure the strategies match your short-term and long-term investment objectives. All too often people end up making decisions one at a time, at different times in their lives, with different people, under different circumstances. Having a sound strategy in place will allow you to view your finances with a macro-economic lens vs a micro-economic view. Stay the course and adjust accordingly from a risk and tax standpoint.

RELATED: Financial lessons learned through the pandemic

A great tip for lowering utility bills or car insurance premiums: Simply ask! There may be things you are not aware of that could save you hundreds of dollars every month. You just need to call all of the companies that you do business with to find out about cost-cutting strategies. 

RELATED: Overcome your fear of finances

To learn more about Abrahamsen Financial, click here

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How to Get a Loan Even with Bad Credit

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Sana pwedeng mabura ang bad credit history as quickly and easily as paying off your utility bills, ‘no? Unfortunately, it takes time. And bago mo pa maayos ang bad credit mo, more often than not, kailangan mo na namang mag-avail ng panibagong loan. 

Good thing you can still get a loan even with bad credit, kahit na medyo limited ang options. How do you get a loan if you have bad credit? Alamin sa short guide na ito. 

For more finance tips, visit Moneymax.

 

 

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