The recently enacted CARES Act provides a certain level of relief for borrowers who have experienced financial hardship as a result of the Coronavirus outbreak. How does it affect homeowners with federally-backed mortgages? Here’s what you should know.
What it Does
The Coronavirus, Aid, Relief, and Economic Security Act (CARES Act) directs banks and other lenders to suspend a qualified borrower’s federally-backed mortgage payments for up to 360 days. The CARES Act also stipulates that lenders or loan servicers may not foreclose on qualified borrowers until at least December 31, 2020. All of this is designed to help prevent foreclosures and avert another mortgage crisis like the one in 2008.
To qualify for mortgage forbearance as outlined by the CARES Act, a borrower must have experienced financial hardship due to the COVID-19 outbreak. This could mean you lost a job due to the outbreak. It could also mean you couldn’t work because you fell ill, or you had to stay home from work to take care of a sick family member. Whatever the case, if you were financially affected by the outbreak or state-imposed restrictions, you likely meet the criteria for relief under the CARES Act.
With that said, a borrower is only entitled to mortgage forbearance if they have a federally or GSE-backed mortgage loan.
How to Request Mortgage Relief
Since your mortgage relief options depend on who backs or owns your mortgage, you need to figure out who actually services your loan. This will almost always be the company that you send your payments to each month. If you aren’t sure, call them to find out.
If you have a federally or GSE-backed mortgage loan and have experienced financial hardship due to the pandemic, you have a right to obtain a forbearance for up to 180 days. You also have the right to obtain an extension for an additional 180 days if necessary.
Start by calling your loan servicer. Be prepared to answer a few questions. It can help to review this script provided to services by the federal government.
What Should I Ask?
In addition to answering key questions, you will want to ask a few questions of your own. These should include:
- What criteria will you use to determine whether I am granted a forbearance?
- What are my rights if I do not agree with your final determination?
- What options do I have to help temporarily suspend or reduce my payments?
- Are there loan modification, forbearance or other options that apply to my situation?
- Are there any fees associated with each option?
- When will you waive all the late fees on my federally or GSE-backed mortgage account?
- What should I do at the conclusion of my approved forbearance period?
- Will I owe interest on unpaid mortgage payments during the forbearance period?
Once you secure forbearance or another mortgage relief option, ask your servicer to deliver written documentation confirming the details of your agreement.
What if Your Mortgage Doesn’t Qualify?
If you do not have a federally or GSE-backed mortgage loan, contact your servicer to ask what options are available to you. The Consumer Financial Protection Bureau and other financial regulators have strongly encouraged lenders to work with borrowers to help prevent foreclosures and delinquent payments due to COVID-19.
What to Do After Receiving Mortgage Relief
During your coronavirus forbearance period, there are a number of other things you can do to protect yourself. This includes paying attention to your monthly mortgage statements and stopping any auto-payments for your mortgage. You should also keep a close eye on your credit rating and make sure you or your loan servicer is keeping up with property taxes and insurance payments.
Once your income is fully restored, it’s important to contact your servicer and resume your payments as soon as possible. With forbearance, you will still owe the payments you missed, and fewer missed payments will reduce the amount you owe down the road.
With 60-plus years of combined experience, The Wheaton Team provides expert advice and guidance for clients. Our team specializes in residential real estate throughout all of El Paso County, including the Tri-Lakes area and all of Colorado Springs. Let us guide you through each step of the buying, selling and financing process, so you can turn dreams into reality.