One way or the other, America will come out the other side from COVID. But What that looks like really is a disturbing and confusing picture. How exactly are Americans expected to pay bills when their employer shuts down, stops paying paychecks? Worse, what happens when Americans CANNOT work because they’re living in an area of declared emergency…and on the far end of the spectrum, if you live in an area with a Shelter in Place order? Well, that’s certainly a very difficult question.  The government has ordered you not to leave your home. How do you access money? How do you even pay your bills?

COVID Mortgage Or Debt Relief in US?

In Italy and other countries, governments are ordering suspension of debt payments including mortgages. Not so here in the US….and not likely:

America’s mortgage market is much bigger than Italy’s $423 billion of outstanding home-loan debt. The U.S. has about $11 trillion of mortgages on one- to four-family homes, according to Federal Reserve data. More than half of that is contained in bonds compiled and backed by Fannie Mae and Freddie Mac.

Homeowners in Italy are seeing many of their bills suspended – including mortgages – as the country deals with the coronavirus pandemic, and now other European nations are considering similar moves.

Is a “mortgage holiday” coming to America?

The short answer is: probably not. Most American mortgages are packaged into bonds with legal terms that dictate what the servicers who handle the billing can and can’t do. There are ways servicers can offer forbearance – an agreement to let borrowers either pay at a lower interest rate or suspend payments temporarily because of a hardship. But it’s on a case-by-case basis.

“Somebody owns those bonds,” said Mark Vitner, a senior economist with Wells Fargo. “Who is going to make those interest payments?”

Any missed or reduced payments typically have to be repaid, with interest. Sometimes, that means the loan will be re-amortized, so whatever you don’t pay now, you’ll be paying off over the remaining years of your loan, with interest.

America’s mortgage market is much bigger than Italy’s $423 billion of outstanding home-loan debt. The U.S. has about $11 trillion of mortgages on one- to four-family homes, according to Federal Reserve data. More than half of that is contained in bonds compiled and backed by Fannie Mae and Freddie Mac.

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