How to Get Mortgage Relief Through the CARES Act

New legislation offers additional coronavirus mortgage relief

The Coronavirus, Aid, Relief, and Economic Security (CARES) Act directed lenders holding federally backed single-family mortgages to suspend borrowers’ payments for up to a maximum of 360 days if they experienced financial hardship due to the coronavirus outbreak. Similar, but shorter (90 days) forbearance was available to owners of multifamily units with federally backed mortgages.

Subsequent legislation, including the Consolidated Appropriations Act, 2021 and the American Rescue Plan Act of 2021, as well as presidential executive actions, have resulted in additional mortgage relief during COVID-19.

Key Takeaways

  • If your mortgage is backed by the federal government, provisions of the 2020 CARES Act and subsequent legislation allow you to potentially suspend payments for up to 18 months if you experience COVID-19-related financial hardship.
  • You can apply for initial forbearance if your loan is backed by the U.S. Department of Housing and Urban Development (HUD), the Federal Housing Administration (FHA), the U.S. Department of Agriculture (USDA), or the U.S. Department of Veterans Affairs (VA), or if you are the owner of a multifamily rental unit with a loan backed by the government.
  • There is no deadline to apply for initial forbearance for homes backed by Fannie Mae and Freddie Mac.
  • The foreclosure moratorium on federally backed loans expired on July 31, 2021.
  • Under Coronavirus Aid, Relief, and Economic Security (CARES) Act legislation, you will not be charged late fees or reported to credit bureaus.
  • Being in forbearance may allow you to avoid foreclosure.
  • If your loan is not federally backed, you can contact your loan servicer, state government, or local authorities to find out what options you have.
  • Both the Consolidated Appropriations Act, 2021 and the American Rescue Plan of 2021 contain additional funding for housing relief.

Mortgages Affected

COVID-19 mortgage relief applies to loans backed by the federal government and Government Sponsored Enterprises (GSEs) and defined as loans:

  • Insured by the Federal Housing Administration (FHA)
  • Insured under Section 255 of the National Housing Act, which involves home equity conversion mortgages administered by the U.S. Department of Housing and Urban Development (HUD)
  • Guaranteed under Section 184 or 184A of the Housing and Community Development Act of 1992, which targets American Indian families and Hawaiian housing
  • Guaranteed or insured by the U.S. Department of Veterans Affairs (VA)
  • Guaranteed, insured, or made by the U.S. Department of Agriculture (USDA)
  • Purchased or securitized by the Federal Home Loan Mortgage Corp. (Freddie Mac) or the Federal National Mortgage Association (Fannie Mae)

Federally eligible mortgages may be held by residential owners as well as by landlords and other commercial owners. The rules differ for residential mortgage borrowers versus multifamily property owners.

How to Find Out If Your Loan Is Federally Backed

To find out whether your loan is backed by the federal government, making you eligible for the help noted above, here are some actions that you can take:

  • Call or write your mortgage servicer. Your servicer is required to tell you who owns your mortgage and provide you with the name, address, and phone number of whoever owns your mortgage.
  • Check online. Use loan lookup tools provided by Fannie Mae or Freddie Mac to find out if either of those two government-backed providers owns your mortgage.
  • Check the Mortgage Electronic Registration Systems (MERS) website to find your servicer, if you don’t know who it is.

What If You Have a Non-Government-Backed Mortgage?

Federal regulators believe most non-government-backed lenders and loan servicers will adopt policies similar to those mandated by the CARES Act. To find out, contact your loan servicer, ask what programs it has in place to help homeowners impacted by the coronavirus outbreak, and follow any instructions you are given.

Although the CARES Act does not require private lenders to offer relief, if you and your lender come to any type of loan modification agreement, then the law regarding not reporting reduced or paused payments to credit bureaus does apply to you.

If your mortgage forbearance is set to expire soon, then you may be able to request an extension—but you must apply before forbearance ends.

Paused Payments (Forbearance)

If you are a homeowner with a government-backed mortgage and experience COVID-19-related financial hardship, you can pause mortgage payments for up to 18 months (including extensions) in a process known as forbearance.

  • If your mortgage is backed by Fannie Mae or Freddie Mac: You may request up to 18 months of total forbearance. To be eligible, you must have been in an active forbearance plan as of Feb. 28, 2021. Otherwise, the maximum forbearance is 12 months.
  • If your mortgage is backed by HUD/FHA, USDA, or VA: You may request up to 18 months of total forbearance. To qualify, you must have requested an initial forbearance plan on or before June 30, 2020. Otherwise, the maximum forbearance is 12 months.

Not all borrowers will qualify for the maximum in either case. If your mortgage is backed by Fannie Mae or Freddie Mac, there is currently no deadline to apply for initial forbearance.

If you own a multifamily rental property with a loan backed by the federal government, recent action by the Federal Housing Finance Agency (FHFA) lets you begin a new or modified forbearance of up to 90 days.

If you are granted forbearance for the multifamily property, you must:

  • Inform your tenants in writing about protections available to them during forbearance.
  • Agree not to evict them for nonpayment of rent while your property is in forbearance.
  • Give tenants at least a 30-day notice to vacate (for other reasons).
  • Agree not to charge them late fees or penalties for nonpayment of rent.
  • Allow tenants flexibility in repaying back rent over time (not in a lump sum).

If you are offered forbearance under the CARES Act or by a private lender, carefully review the terms before signing. It’s best to have the missing payments added to the end of your mortgage term. Some lenders, particularly from the private sector, may have special terms that may only defer payments for a short time and require a balloon payment.

Mortgage lending discrimination is illegal. If you think that you’ve been discriminated against based on race, religion, sex, marital status, use of public assistance, national origin, disability, or age, there are steps you can take. One such step is to file a report with the Consumer Financial Protection Bureau (CFPB) or with HUD.

How to Request Forbearance

As a homeowner with a federally backed mortgage loan, you will need to contact your loan servicer (the company to which you make payments) to request forbearance. You do not need to submit extensive documentation, mainly only affirmation of your financial hardship, which can be done over the phone. Your initial forbearance can be for up to 180 days. Depending on when your initial forbearance began, you can extend forbearance an additional 180 or even 360 days.

Landlords of multifamily units must have been current on payments as of Feb. 1, 2020, to be approved for forbearance relief. If applicable, landlords should submit an oral or written request to their servicer, who can approve the initial 30-day forbearance, with subsequent extensions of up to an additional 60 days.

Right to Halt Forbearance

As a borrower, the CARES Act gives you the right to halt forbearance at any time. This applies to you if you have a government-backed loan on a regular residential property or a multifamily building.

No Extra Penalties, Interest, or Late Fees

During any forbearance period granted to you, your servicer cannot charge any penalties, interest, or fees that would not have been charged if you had made your payments on time and in full. Landlords may not charge tenants any fees or penalties for late payment of rent during any forbearance period granted to the landlord.

No Reporting to Credit Bureaus

Lenders are directed not to report you to credit bureaus for late or missed payments, provided you are in one of the forbearance programs. This means the fact that you are not making full payments, or not paying at all, will not affect your credit rating.

Aug. 26, 2021

On Aug. 3, 2021, the U.S. Centers for Disease Control and Prevention (CDC) issued a new order preventing landlords from evicting renters in areas of high or substantial COVID-19 transmission rates, effective through Oct. 3, 2021. However, that order was struck down by the U.S. Supreme Court on Aug. 26, 2021, effectively ending the eviction moratorium.

No Foreclosures or Evictions

The moratorium on foreclosures and evictions for federally backed mortgages runs through Sept. 30, 2021.

Additional Assistance

Once you reach the end of your forbearance period, you may qualify for additional assistance if you need it. Work with your servicer and, if possible, resume making your regular payments. If you still need assistance, ask your servicer what other options are available. This could include reducing your monthly payments or some other type of loan modification.

In the event that you and your lender reach an agreement on any loan modification, you cannot be reported to credit bureaus as “not current” on that loan.

Financial Help for Homeowners and Landlords

Forbearance is not the same as forgiveness. Forbearance only puts off the inevitable day when paused payments must be made up. Programs funded by the Consolidated Appropriations Act, 2021 and the American Rescue Plan Act of 2021 provide financial assistance to homeowners and landlords under two programs: the Homeowner Assistance Fund and the Emergency Rental Assistance Program.

Homeowner Assistance Fund

The Homeowner Assistance Fund (HAF) was created to prevent mortgage delinquency, defaults, foreclosures, loss of utilities, and displacement of homeowners. The use of funds is prioritized for homeowners who have experienced the greatest hardships. Funds can be used for:

  • Assistance with mortgage payments
  • Homeowners insurance
  • Utility payments
  • Other specified purposes

How to Request Homeowner Assistance Funds

HAFs are in the process of being distributed to states for redistribution to homeowners. The U.S. Department of the Treasury has provided guidance for states to use in developing their individual HAF plans.

You will request funds from your state once your state’s HAF plan has been approved and the system is up and running. Meanwhile, the National Council of State Housing Agencies’ Homeowner Assistance Fund web page features a map showing the status of each state’s HAF to date.

Emergency Rental Assistance Program

The Emergency Rental Assistance (ERA) program provides funding to help renters who are unable to pay rent or utilities. The funds are provided directly to states, U.S. territories, local governments, American Indian tribes, Tribally Designated Housing Entities, and the Department of Hawaiian Home Lands. These entities may use ERA funds to provide assistance through existing or newly created rental assistance programs.

How to Request Emergency Rental Assistance

Since the Treasury disburses ERA funds to states and other entities, you must apply for ERA assistance through the appropriate state or entity. To help with this, the Treasury has created a Find Rental Assistance web page to help tenants and landlords find rental assistance programs in their local area. Use the website to direct yourself to the appropriate state or other authority to determine how to apply to receive assistance or to help your tenants do so.

Don’t Just Stop Making Payments

If you are in a distressed situation, you may have more options than you realize. Whether your loan is backed by the federal government or a private lender, the one thing you should not do is just stop making payments. You must contact your lender or servicer to let the company know that you are having trouble making payments. Failure to contact your lender could result in many negative consequences, such as additional charges, delinquent credit reports, and ultimately, possible foreclosure and eviction.

Article Sources

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