Facts and Answers
Learn more about how COVID-19 and the CARES Act affect you your home
The CARES Act and COVID-19
Here’s some coronavirus relief your
bank or home loan servicer might not be telling you:
New federal coronavirus relief
measures enable most homeowners with mortgage loans to put off making their mortgage payments for a full year. And once we get back to normal, those borrowers will have the option to tack those missed payments to the end of their loan terms.
Your credit won’t suffer. Yet, on social
media pages of some of the nation’s largest
banks, consumers say customer service representatives are offering them the opportunity to skip only three months of payments, and they’re saying those payments will become due as a lump sum at the end of those three months, along with the next month’s payment.
“What help is that!” one Bank of America customer complained.
Those customers were given only part of the story. The federal CARES Act, signed by President Trump, gives borrowers of
federally backed loans the right to contact their mortgage loan servicer and demand what’s called a forbearance – in other words, skipping their mortgage payments – simply by attesting that the coronavirus crisis has resulted in financial hardship. No documentation of the hardship is required, regardless of how many questions your servicer asks about your financial situation. Mortgage servicers, however, are allowed to approve forbearance periods for 90 days at a time. According to Ralph Williams, spokesman for the Federal Housing Finance Agency (which oversees Fannie Mae and Freddie Mac, guarantors of nearly half of all U.S. loans), "Before those 90 days are over, customers need to reach out again if they need another 90 days, and so on, up to a year."
At the end of that forbearance period, however long it is, when you are ready to resume making monthly payments, servicers of
federally backed loans must give customers several repayment options, including repaying the missed payments as a lump sum or spreading the payments over time, to be paid off in addition to regular monthly payments. In some cases, borrowers may choose to refinance their loans and reduce their monthly payments. “Keep in mind, the servicer’s goal is to get the borrower into a plan that’s best for them,” Williams said. Another option, which many borrowers will choose because it requires no additional out-of-pocket expense, will be to add the entire missed amount to the end of the loan, extending the loan by the number of missed months. It’s important to note that these requirements apply only to federally backed loans. But chances are better than good that you have one.
You might think your loan is owned by the bank, credit union or mortgage servicing company that collects your payments and
pays your taxes and insurance. But in fact, the Urban Institute, a nonprofit research organization, estimates that about 70% of home loans in the United States – about 33.4 million – are actually owned by an agency backed or controlled by the federal government, including Fannie Mae and Freddie Mac, government-sponsored enterprises that back a combined 28 million loans. The others are backed by the U.S. Department of Housing and Urban Development’s Federal Housing Administration (FHA or HUD loans, reverse mortgages, and loans for Hawaiian natives and Native Americans), the Veterans Administration and the Department of Agriculture (USDA loans).
There are a number of ways to find out
which agency owns your loan. The easiest way is to call the company where you send your loan payments and ask. Online lookup tools are available to find out whether your loan is owned by Fannie Mae or Freddie Mac.
Loans backed by any of those agencies fall
under the protections enacted by the CARES Act, which stands for Coronavirus Aid, Relief, and Economic Security. In addition to granting up to a year of forbearance, with no penalties, fees or additional interest, the government has forbidden any foreclosure actions against borrowers of those loans for 60 days beginning March 18. Providing borrowers the option to add the missed payments to the end of the loan
was specifically dictated to loan servicers by the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac. An official at one large banking company, who asked to speak only on background, said his company understands that the requirement is also in place for loans backed by the other federal agencies. An official at another large banking company, also speaking on background, said it’s expected that all of the federal agencies will soon require servicers to offer the same repayment options. “The group tends to move together,” he said.
Alys Cohen, staff attorney for the National Consumer Law Center, which is tracking federal mortgage relief efforts, said repayment options that other agencies, such as FHA, USDA, and VA, require servicers to offer might be slightly different but the intention is the same. “The policies are somewhat different for each ‘channel,’ but all of them have loss mitigation options for the end of a forbearance such that you don’t have to pay a lump sum,” she said. The CARES Act doesn’t specify how mortgage servicers should handle the escrowed portion – property taxes and insurance – of mortgage payments.
As the coronavirus pandemic continues to roll across
the U.S., keeping many individuals in semi-isolation, millions are already out of work for the foreseeable future and others are likely to become so. How will those suddenly without income be able to keep a roof over their heads?
The federal government and individual states are
stepping in to provide protection for homeowners and renters. On the state level, some initiatives are specifically intended to provide relief to homeowners and tenants financially impacted by COVID-19, while others—such as judicial orders suspending nonemergency civil cases including evictions and foreclosures—are aimed at protecting court personnel and the public from contamination during face-to-face hearings. The orders and suspensions are temporary and mostly tied to the end of stay-at-home and shelter-in-place periods. The orders generally only prevent landlords and lenders from executing or moving forward with law enforcement actions or, less commonly, legal proceedings that would lead to eviction or foreclosure.
Tenants and homeowners ultimately will still be responsible for making their rent and mortgage payments. Only a few
jurisdictions have initiatives that go beyond temporary forbearance to potentially provide financial assistance to some homeowners and tenants.
Assessing the Borrower’s Situation:
As the Consumer Financial Protection Bureau (CFPB)
advises on its coronavirus mortgage relief page, the first step for an affected mortgage borrower is to determine their individual situation:
If a borrower can pay their mortgage, then they should make the payment. If there’s not an immediate problem with paying the mortgage, it’s better for the borrower to start with the mortgage servicer’s website to see what COVID-19-specific information is available than it is to call, as the servicer is busy working with those who can’t pay this month.
If a borrower can’t pay their mortgage, or can only make a partial payment, then they should contact their mortgage servicer immediately, and be prepared for longer call wait times than normal.
When a lender offers any mortgage forbearance or payment deferral option, it’s important for the borrower to understand the
terms under which any skipped payments will be made up after the forbearance period ends. These policies will vary by institution. For example, one lender may require the missed payment(s) to be made up as soon as regular payments resume, while another lender may add the missed payment(s) onto the end of the loan term.
Federal Mortgage Relief Programs
Federally Backed Mortgages:
Under the provisions of the CARES Act, individuals with federally backed mortgage loans who are experiencing financial
hardship due to COVID-19 can request a forbearance period by contacting their mortgage servicer. Federally backed mortgages include FHA, VA, USDA, Fannie Mae and Freddie Mac.
The CARES Act provides for affected
borrowers to defer their mortgage payments
for up to 180 days. Borrowers also have the
right to apply for an extension of another 180
days of forbearance. There will be no penalties
or fees added to the account, although regular
interest will still accrue. Borrowers must
contact their mortgage loan servicers to
initiate this forbearance. The Department of
Housing and Urban Development (HUD) was
ordered by President Trump on March 18 to
next 60 days. The moratorium applies to
single-family homeowners with mortgages
insured by the Federal Housing Administration
(FHA), a part of HUD that insures home loans
made by FHA-approved lenders. The order not
only prevents new foreclosure actions but also
suspends all foreclosure actions currently in process. According to the CFPB, nearly half of all U.S. home mortgages are owned or backed by Fannie Mae or Freddie Mac.
The Federal Housing Finance Agency (FHFA), which oversees Fannie Mae, Freddie Mac, and the Federal Home Loan banks, is
providing payment forbearance to borrowers impacted by the coronavirus for up to 12 months due to hardship. Penalties and late fees also are being waived. No delinquency related to forbearance will be reported to credit bureaus. Additional information is available from the FHFA’s page on mortgage help for homeowners impacted by COVID-19, from Freddie Mac’s coronavirus help page and from Fannie Mae’s coronavirus help page.
Additionally, Freddie Mac has implemented a program offering relief to multifamily landlords whose mortgages are financed with
a Freddie Mac multifamily fully performing loan. Under this program, landlords can defer loan payments for 90 days by showing hardship due to COVID-19; in return, landlords are required not to evict any tenant based on nonpayment of rent during the forbearance period.
State Mortgage Relief Programs:
As of mid-April, all 50 states and the District of
Columbia are implementing relief measures for homeowners affected by the COVID-19 pandemic. While most states are halting evictions and foreclosures during their respective state of emergency periods, mortgage and rent payments may still need to be made. These state-specific relief measures are in flux and will change over time.
Options and Protections
Learn about mortgage relief options and protections federal laws have put in place two protections for homeowners with
federally or Government Sponsored Enterprise (GSE) backed mortgages (FHA, VA, USDA, Fannie Mae, Freddie Mac). Learn more about these options and if they're right for your situation.
Relief for all federally or GSE-backed mortgages:
Under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, and guidance from federal agencies and the GSEs, there are two protections for homeowners with federally or GSE-backed (Fannie Mae or Freddie Mac) or funded mortgages:
First, your lender or loan servicer may not foreclose on you until at least August 31, 2020. Specifically, the CARES Act and the guidance from the GSEs, the FHA, the VA, and the USDA, prohibit lenders and servicers from beginning a judicial or non-judicial foreclosure against you, or from finalizing a foreclosure judgment or sale. This protection began on March 18, 2020, and extends through at least August 31, 2020.
Second, if you experience financial hardship due to the coronavirus pandemic, you have a right to request and obtain a forbearance for up to 180 days. You also have the right to request and obtain an extension for up to another 180 days (for a total of up to 360 days). You must contact your loan servicer to request this forbearance. There will be no additional fees, penalties or additional interest (beyond scheduled amounts) added to your account. You do not need to submit additional documentation to qualify other than your claim to have a pandemic-related financial hardship.
Forbearance is when your mortgage servicer or lender allows you to pause (suspend), or reduce your mortgage payments for a
limited period of time while you regain your financial footing. The CARES Act provides many homeowners with the right to have all mortgage payments completely paused for a period of time. Forbearance doesn’t mean your payments are forgiven or erased. You are still required to repay any missed or reduced payments in the future, which in most cases may be repaid over time. At the end of the forbearance, your servicer will contact you about how the missed payments will be repaid. There may be different programs available.
Make sure you understand how the forbearance will be repaid. There can be different forbearance programs or options, depending on the type of your loan.
A housing counselor will help you
understand your current situation, explain your mortgage assistance options and review what documents you will need to provide to your servicer. Be able to contact the servicer and help prepare and submit your application to the servicer on your behalf. Help you make a budget to help you pay your monthly mortgage payment and other expenses and provide information about local resources that may be helpful to you.