CARES Act Forbearance: Mortgage Impacts

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What benefits are available for your mortgage under the CARES Act? The Law Office of Michael A Ziegler: Debt Fighters gives the details to know your rights.

The CARES Act protections are not automatic

The COVID-19 pandemic has changed everything—the way we interact with the world, the way we work, and the way we spend our free time (glad sports are back!). Just like everything else, the pandemic has had a huge impact on people’s finances. That impact has cause folks to not make their mortgage payments. CNBC reported that 32% of U.S. households missed their July housing payments, which is a “historically high” number.

To alleviate the historically high lapse in mortgage payments, the CARES Act has put in place protections for people who have government-backed mortgages. How do you know if your mortgage is government-backed? One of the easiest ways is to ask your mortgage servicer if any of the following entities back your mortgage:

  • Federal Housing Administration (“FHA”)
  • Veterans Affairs (“VA”)
  • U.S. Department of Agriculture (“USDA”)
  • Fannie Mae
  • Freddie Mac

If you have one of those government-backed mortgages, the CARES Act allows you to temporarily suspend payments if you are experiencing financial difficulty due to the impact of coronavirus. Those protections include:

  • You have the right to request forbearance of up to 180 days.
  • You have the right to request an extension for another 180 days.
  • No additional fees, penalties, or interest can be added to your mortgage account during the forbearance. Regular interest will still accrue.
  • If your mortgage was current when the CARES Act forbearance is granted, your mortgage servicer is required to report your account during the forbearance period to the Credit Reporting Agencies.

The CARES Act protections are not automatic. To trigger the CARES Act protections, there’s a few steps to complete:
1. Contact your mortgage servicer to request the forbearance.
2. Tell your servicer that you are experiencing pandemic-related hardship.

And that’s it! You can find contact information for your mortgage servicer on your monthly mortgage statement. Ideally, you will want to use your servicer’s website or email as a primary method of communication since servicers are facing a high volume of requests. Other than contacting your mortgage servicer to notify them of your pandemic-related hardship, no further paperwork or information is required to trigger the CARES Act protections.

A few things to remember regarding CARES Act government-backed mortgage forbearances:

  • Forbearance does not mean forgiveness.
  • The missed payments must be repaid, although they may be paid back over time.

Once the forbearance period is over, your repayment options will differ based on what type of mortgage loan you have. A few examples of government-backed repayment options after the forbearance ends are below:

  • FHA Mortgages: No lump sum repayment is due at the end of the forbearance. FHA has developed the COVID-19 Standalone Partial Claim to assist with repayment, which you may qualify for. Even if your mortgage does not qualify for that option, FHA offers other tools to help you repay the missed payments over time.
  • VA Mortgages: No lump sum repayment is due at the end of the forbearance. VA offers loss mitigation options that can assist Veteran borrows that must repay amounts subject to the forbearance.
  • USDA: Rural Housing Service Guaranteed Loan Mortgages do not require a lump sum payment at the end of the forbearance. USDA also offers loss mitigation options that can assist borrowers after their forbearance ends.

What about if you don’t have a government-backed mortgage? In that case, the CARES Act protections are not available. The Consumer Financial Protection Bureau recommends that you still contact your servicer to discuss options for suspension or reduction of your mortgage payments. If you are approved to move forward with a non-government-backed mortgage forbearance plan, confirm how you’ll be required to pay the amount owed after the forbearance period by asking the following recommended questions:

  • Will I owe the entire unpaid amount in a lump sum once the pause period has ended? Or at the end of the loan term?
  • Can the loan term be extended so missed payments are added to the end of the mortgage?
  • Will subsequent monthly payments be higher for a period of time to make up for the deferred amount?

Such recommended questions can help you make the right decision about how to work with your mortgage servicer during pandemic-related hardships. The CFPB’s website also has information and links on mortgage relief options that can help you determine if other relief is available.

Finally, be on the lookout for scams that are trying to take advantage of consumers whose finances have been affected by the pandemic. Make sure that you are working directly with your mortgage servicer for any mortgage forbearance options. No one else has the ability to approve a forbearance, so don’t trust any companies that tell you they can work with your mortgage servicer on your behalf.

If your government-backed mortgage servicer isn’t handling your mortgage payments properly under the CARES Act, you may be entitled to seek legal assistance to help get you there. Please contact the Law Office of Michael A. Ziegler, P.L.: Debt Fighters at (727) 538-4188 or by visiting their website at: https://attorneydebtfighters.com/.

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Kaelyn Steinkraus Diamond

Michael Ziegler
Michael A Ziegler, PL
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