Americans are struggle to pay mortgages as the economic impact of COVID-19 continues.
Patty Seagrave of Cookeville’s Seagrave Mortgage said people need to be proactive before they miss a payment.
“The very first thing you should do is as soon as you know you may not be able to make your payment, you need to contact your mortgage servicer,” Seagrave said. “This is the person you make your payment to each month. You need to call them immediately.”
Mortgage technology and data provider Black Knight reported mortgage delinquencies surged by 1.6 million in April. That’s the largest single-month increase on record. Seagrave said it’s important to be upfront with your mortgage service to find ways to protect your credit if people struggle to pay mortgages.
“There’s always paperwork, and it will take time,” Seagrave said. “You want to do everything you can do to avoid having a mortgage late show up. That can be damaging to your credit not only immediately but for future things you are trying to do.”
According to the credit scoring company FICO, a missed mortgage payment can affect your credit rating for three years. Three missed payments can take up to seven years to recover. Right now, Seagrave said, mortgage companies have plans in place to assist homeowners.
“I think every mortgage servicer has something in place to try to help their customers,” Seagrave said. “A lot of them have been incredibly proactive in sending out materials, and there has been a lot of material in the news. My advice would be to read through the materials to make sure you understand what you are doing. They’re not just going to forgive the payment. It is going to have to come due, so you need to make sure you know what the plan is in place, and that you will be able to handle that at a later date.”
Seagrave said there are differences between the housing crisis of 2008 and today’s situation. For one thing, she said, the struggles should be more short-term.
“I think the good news is the mortgage values are still there,” Seagrave said. “We haven’t lost the equity in the house like we did. Cookeville and the surrounding area is such a strong market. We are not experiencing what we did back during the mortgage crash whenever property values went down. Now it’s more an issue of we have people who have lost their job or maybe they’ve been laid off temporarily. So, it’s a shorter-term issue of how to make their payment and keep up with it, but the value is there and they are retaining their equity.”
Making a budget and prioritizing what you spend money on are ways Seagrave said people can keep from falling behind.
“Try to do your house payment first because that is just so important,” Seagrave said. “You can call your other creditors, as well. If you have a car payment or a credit card payment, talk to them about some temporary solutions. It’s not just about the mortgage. Several other creditors are willing to work with you and have some things in place.”
Seagrave said as you look at your budget, address your want vs need of each item.