On This Crisis, You Are on Your Own

I lost my job this month, along with millions of people around the country, so far more than 16 million to be precise. And although a generous rescue package passed in congress and companies are willing to help, I still feel I’m on my own. This crisis hit me at the worst possible time, on February 14th, I was diagnosed with coronary artery disease, and had heart surgery on March 12th. On March 26th, and only two weeks after my surgery, I learned that I had been furloughed, along with thousands of employees in my company. In addition to my medical bills that eat a chunk of my safety net, now I have to deal with the incompetence of local and federal governments that had made it very difficult to near impossible to get any help in these difficult times.

Fortunately, I decided not to wait for that help, and I took matters on my own hands. On March 27th I created a gofundme campaign that is now 70% funded by family and friends. People that just like me, had been hit hard economically and psychologically during this crisis. In just two weeks, I had been able to raise twice as much as the government of Florida is willing to give me on unemployment benefits. Other than our friends and family, we are on our own; here is why.

Unemployment is near Impossible to collect.

First of all, even applying for unemployment has been a huge challenge, not only in Florida where I live but in many states around the country. This crisis has demonstrated how incompetent our governors are and how corruption still rampant at the local state level nationwide. Specifically, in Florida, the website was literally designed to fail. Governor at the time Rick Scott ordered the creation of this site, paying the astronomical amount of $77.9 million dollars. The goal was to make the site almost impossible to navigate to prevent people from applying and artificially making unemployment numbers look good. The site is so bad that Ron DeSantis, the current Florida governor made the decision of resorting to paper applications, perhaps relying on an army of people that they don’t have to process these requests for weeks if not months.

I tried to submit my application online for several days, but the site kept crashing, finally, I decided to apply at 2:30 AM in the morning, and, finally my application went through. I didn’t receive any confirmation by email or text message, so I just hope it is all fine. Logging in back to check the status of my application is as difficult as applying for unemployment for the first time. The site keeps crashing consistently, and despite the claims from DeSantis, very little improvement can be seen. There are literally thousands of people around the country whose full-time job now is to make sure their applications go through.

Many families in this crisis had been hit twice. I have friends that worked at Disney that will be furloughing employees starting April 19th, and a couple of them are married to dentists that suddenly found unemployed themselves; this is one of the occupational groups with the most risk of contagion.

The IRS promised $1,200 emergency assistance checks that probably won’t arrive on time, when people need it the most, although checks started to be issued yesterday, some Americans won’t receive them until September. The government also promised an additional $600 per week to complement unemployment benefits, but there is no clear direction on how those funds would be channeled and when. At the moment, the government is relying on the deficient unemployment filing infrastructure of this country, which basically means that the prospects looked very grim. Most of these systems were made to handle less than 25,000 people at the time, where unemployment was around 3%, not 150,000 or 250,000 applicants at the same time, which is the case now. If people are not able to apply at the state level, those additional $600 per week for three months would not be issued either.

The government initiative is so flawed that they didn’t even account for the cost of living when allocating these funds. $600 per week in South Carolina may seem like a lot, but in San Francisco is probably a couple of visits to the supermarket, if not just one.

The website in Florida is so deficient that it doesn’t even list furloughed as an option when explaining the reasons for applying for unemployment, and this is the state that gets slammed every couple of years by major hurricanes and devastating floods. Didn’t they contemplate furloughed as an option? In my application, I had to select layoff, which was the closest reason I found it to furlough. Now I’m worried that my application would be rejected just because of that, I wouldn’t be surprised.

To make things even more complicated, because I’m furloughed, my employer stills paying me 20% of my salary; that amount is more than $275 per week, which disqualifies me automatically from filing for unemployment in the state of Florida. This means that potentially I won’t be receiving Florida unemployment or the $600 per week promised by the government. An absurdity that makes very little sense to me and puts me in a precarious situation.

At this point, I’m not sure I’ll get the promised checks of $1,200, not sure if I’ll get unemployment benefits, and not sure if I’ll be getting the $600 per week for 12 weeks. Everything is up in the air. In the meantime, mortgage payments, schools, and bills keep coming.

I should be able to withdraw my 401K without penalties but I can’t

Part of the coronavirus stimulus package contemplates a raised of 401(k) distributions of up to $100,000 without penalties. But one thing is what the bill says and another one completely different what is happening on the street. Although these provisions are contemplated in the bill, at this moment, my 401(k) administrator still claiming that they haven’t received any direction or guidelines from the government or my employer on how to proceed with this. Apparently, my employer needs to approve the changes before they even start implementing changes in their own systems. If I want to withdraw money today from my 401(k) I’ll be charged the same penalty I would have been charged before the crisis, even though that would be against the law.

So, in addition to not being able to claim my unemployment benefits, my 401(k) money is trapped until further notice. I had called several times my 401(k) administrator, and their answer hasn’t changed. My assumption is that this will take weeks to resolve, perhaps when my furlough is over or when I no longer need the money.

According to bank, rate only 41% of US households would be able to pay $1,000 for an emergency from savings, the other 59% may have to resort to credit cards, family and friends, personal loans, or something else. It is clear that the economic impact of this crisis goes way beyond a one-time charge of $1,000 dollars. If families’ income suddenly stop, education, food, and shelter can add three times that easily. 401(k) should be the last resort to get cash during this crisis, but many people may be forced to tap into it, especially when unemployment benefits are so dysfunctional and hard to get. Unfortunately, that’s an option we don’t even have available at the moment.

Forbearance is a trap

Another prevision of the coronavirus stimulus package is the ability to suspend mortgage payments for up to a year or less if you are not one of the lucky ones in which mortgage is federally-backed. Unfortunately, this initiative could be as flawed as the unemployment benefits and the 401(k) withdrawals. First of all, forbearance doesn’t mean forgiveness, and if you are not careful, you may end up in a worst situation than the one you are in right now.

Similar to the websites and call centers of unemployment benefits programs looking for mortgage assistance had skyrocketed, leading to longer wait times to speak with a representative. Forbearance requests grew by 1,896% between March 16 and March 30, and before that increased 1,270% between March 2 and March 16.

Even though my loan was purchased by Freddie Mac on September 12, 2016, when I called my bank, I found out that the “help” I was offered was only a foolish trap that will only put me in a worst situation three months from today. This is how the forbearance works according to 53 bank. I can stop the payments today, but only for three months, this is very different from what the government stipulates of up to 12 months. But the worst part is that after these three months, I should come up with a balloon sum, including all the missing payments plus interests. It shouldn’t be implied that if I’m applying for forbearance, I don’t have the money to pay now or three months from now?

My furlough goes through June 30th, which means that it is very unlikely that I’ll come up with a balloon sum at the end of the forbearance. In addition, although the government doesn’t allow loan servicers to report these late payments to credit rating agencies, I’m not so sure about that, the financial industry persuaded congress to reject a moratorium on recording missed and late payments on credit reports during the coronavirus outbreak, raising concerns that people who lose their jobs will take a lasting hit to their credit scores. In addition, the legislation has prevented credit bureaus from reporting negative credit information for four months, but my concern is that if I delay my mortgage payments for a year, will I start being reported four months from today?

Despite the forbearance terms being so irrational, it seems that it is not even worth to try, not only I would be very unlikely to come up with this balloon sum after three months, but also, I’ll put my credit score at risk.

So, with no unemployment benefits, not 401(k) withdrawals and no mortgage forbearance. I thank God that I have friends and family that, despite their own challenges, were very kind to support me and my family and help me navigate through these difficult times. We are on our own.