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How the Coronavirus Is Affecting U.S. Creditors

Posted on in Debt Collection

How the Coronavirus Is Affecting U.S. CreditorsThe coronavirus outbreak in the U.S. is being fought on two fronts: public health and the economy. Government efforts to slow the spread of the virus have caused many Americans to lose their jobs or see their pay drastically cut. Among other expenses, people who are out of work may have more difficulty repaying their debts. Creditors are in a delicate position where they must balance their own interests against the hardships that many debtors are experiencing. As a result, forces in the public and private sector are providing debt relief by allowing some debtors to suspend their payments without penalty.

Government Action

The federal government has recently issued orders in regards mortgages and student loan payments:

  • Mortgages that are backed by Fannie Mae, Freddie Mac, and the Federal Housing Administration are eligible for up to 12 months of forbearance.
  • Lenders cannot charge late fees on the delayed payments.
  • Foreclosures are suspended for 60 days, starting from March 18.
  • The proposed stimulus bill would suspend federal student loan payments until Sept. 30.

Various states have enacted similar suspensions on foreclosure and eviction for mortgages that are backed by state programs. As of March 25, Illinois had not announced any mortgage forbearance period.

Creditor Response

Some members of the mortgage industry have led the calls for relief for those economically affected by the coronavirus. There are several ways that lenders can be flexible, such as:

  • Forbearing, deferring or suspending payments
  • Delaying action on foreclosures
  • Modifying loan agreements

You must comply with government mandates if a federal or state program is backing a mortgage agreement. For mortgages or other loans that do not fall in this category, you must decide how flexible you should be with a client who starts missing payments. There will be public and industry pressure to be lenient, but no one knows how long the economic effects of the coronavirus will last. It will be important to communicate with your clients about how the virus has affected their financial circumstances and how much they can afford to pay each month.

Contact a Chicago Debt Collection Attorney

Federal and local guidelines on debt collection may continue to change in the coming months, depending on how bad the coronavirus outbreak gets. It will be important to anticipate changes that may limit when and how you can collect from your clients. An Illinois debt collection lawyer at Walinski & Associates, P.C., is available to discuss your legal options during this uncertain time. Schedule a consultation by calling 312-704-0771.

Source:

https://www.npr.org/2020/03/19/818343720/homeowners-hurt-financially-by-the-coronavirus-may-get-a-mortgage-break

Illinois Creditors Bar Association Chicago Bar Association Illinois State Bar Association
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