If you've recently fallen behind on mortgage payments—or think you soon will—due to the coronavirus (COVID-19) outbreak, federal and, in some cases, state laws can potentially help you when seeking mortgage assistance. You can ask for a forbearance, which provides temporary payment relief, or apply for a more permanent loss mitigation option, like a loan modification.
Under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, homeowners with a federally backed mortgage loan, regardless of delinquency status, who're experiencing a financial hardship due directly or indirectly to COVID-19, can get a forbearance (sometimes called a "COVID-19 forbearance" or "CARES Act forbearance").
A federally backed mortgage loan is one that is:
If you're not sure whether your loan is federally backed, you can get that information from your servicer.
To get the forbearance, you need to make a request to your loan servicer within the "covered period" and affirm that you've suffered a financial hardship due to the COVID-19 emergency; the servicer can't require any additional documentation beyond your attestation.
The CARES Act doesn't define the term "covered period" during which you can ask for a forbearance. A definition of "covered period" is set forth in a different section of the Act, one which addresses forbearances in connection with federally backed loans on multifamily properties (see below). But that section doesn't apply to one- to four-unit properties.
So, the different federal agencies are taking various approaches to forbearance deadlines for mortgages on properties of one to four units. Keep these deadlines in mind if you want to request a forbearance or an extension of that forbearance. Until further guidance comes out, it would be safest to request your initial forbearance and extension by the given deadline.
Fannie Mae and Freddie Mac haven't issued any guidance giving a deadline to request an initial forbearance. So, it's currently unclear exactly how long borrowers get to request forbearances for Fannie Mae and Freddie Mac mortgage loans.
On June 24, 2021, an announcement from the Biden-Harris Administration says that homeowners with Fannie Mae or Freddie Mac-backed mortgages who have COVID-related hardships remain eligible for COVID-related forbearances.
Homeowners with FHA-insured loans, including reverse mortgages (who can request a delay of foreclosure), have until September 30, 2021, to request a COVID-19 forbearance (a CARES Act forbearance) from their mortgage servicer.
The deadline for forbearance requests for VA-guaranteed loans is September 30, 2021.
The USDA's deadline for requesting a CARES Act forbearance is September 30, 2021.
In addition to CARES Act forbearances, the USDA is also offering year-long forbearances to direct home loan borrowers who've been impacted by the coronavirus crisis. The forbearance may be extended for another year at your request. During the forbearance period, the servicer can't charge fees, penalties, or interest beyond the amounts calculated as if you had made all contractual payments on time.
If you can resume making your regular payments at the end of the forbearance, you'll be able to repay the skipped amounts through either:
If you can't afford to resume making your regular payments, the servicer must evaluate you for other options, like a term extension, capitalization of the arrearages, or a mortgage recovery advance (a one-time payment from the USDA to help bring the loan current).
Under the CARES Act, the forbearance period will generally last up to 180 days and can possibly be extended up to 180 additional days. The right to get this type of forbearance applies to mortgage loans secured by a first or subordinate lien on residential real property, including individual units of condominiums and cooperatives, designed principally for the occupancy of from one to four families. You can stop the forbearance at any time.
Forbearance extensions for FHA-insured, VA-guaranteed, and USDA loans. The Department of Housing and Urban Development (HUD), the Department of Veterans Affairs (VA), and the Department of Agriculture (USDA) have announced that borrowers with FHA-insured, VA-guaranteed, and USDA loans can get up to six months of additional mortgage-payment forbearance in three-month increments if they entered a forbearance on or before June 30, 2020.
For FHA-insured loans, if the initial forbearance date is July 1, 2020 to September 30, 2020, you can get a three-month extension after the initial two 180-day periods. If the initial forbearance date is October 1, 2020 to June 30, 2021, you can only get two 180-day forbearance periods. And you can only get a six-month forbearance if your initial request is made between July 1, 2021, and September 30, 2021.
Forbearance extensions for Fannie Mae and Freddie Mac-backed loans. The FHFA announced that borrowers with Fannie Mae and Freddie Mac-backed loans could extend their forbearances for another three months after the initial 180-day forbearance and 180-day extension expire. To get the forbearance extension, borrowers must have a COVID-19 forbearance plan in place on or before February 28, 2021, and other limits might apply. In addition, a COVID-19 payment deferral can cover missed payments. With a deferral, borrowers repay the skipped payments when the home is sold, refinanced, or at mortgage maturity.
It's important to note that a forbearance isn't the same as forgiveness. You'll still owe the amounts you skipped paying after the forbearance period ends. So, it's probably not a good idea to request a forbearance if you can afford to make your payments.
The CARES Act doesn't provide details on forbearance repayment requirements. Usually, after a forbearance, you can pay the skipped amounts:
Some servicers are telling borrowers they'll have to pay a lump sum when a forbearance is over. But your options depend on what entity, like FHA, VA, USDA, Fannie Mae, or Freddie Mac, owns or guarantees your loan, and you probably have alternatives. Under official loan servicing guidelines, the servicer can't require you to get caught up with a lump sum if you're unable to afford it, and you have a FHA, VA, USDA, Fannie Mae, or Freddie Mac loan.
Learn about your rights before you request a forbearance so you'll know if your servicer is giving you bad information. Be sure to document any agreement you make with the servicer. Ask your servicer to provide written documentation that confirms the details of what you've discussed. You can also take screenshots or extensive notes about a phone call. Keep track of when you called and whom you spoke to. Save emails and other communications you receive. Again, if you need help enforcing your rights, consider hiring a foreclosure lawyer to help you.
During the forbearance period, the servicer can't charge fees, penalties, or interest beyond the amounts scheduled or calculated as if you made all contractual payments on time and in full under the terms of the mortgage contract.
Under the CARES Act, if you make an agreement with your servicer (or another creditor) to defer one or more payments, make a partial payment, forbear any delinquent amounts, modify a loan or contract, or get any other assistance or relief—called an "accommodation" under the law—because you were affected by COVID-19, the servicer has to report the account as current to the credit reporting agencies if you weren't already delinquent. This protection is available beginning January 31, 2020, and ends 120 days after enactment, or 120 days after the date the national emergency declaration for the coronavirus is terminated, whichever occurs later.
But you have to come to an agreement with the servicer first to avoid adverse reporting, and you have to stick to the terms of the agreement. Don't unilaterally stop making your payments, delay your payments, or short them. And, if you were already delinquent at the time of the agreement, the servicer can keep reporting the delinquent status unless you bring the account current. In the case of a charge off, the creditor may continue to report it as a charge off.
Even if your loan isn't federally backed, your servicer might offer you a forbearance or another form of relief, like a waiver of late fees or a loan modification. Also, your state might provide special protections or programs for mortgage borrowers. Arizona, California, Connecticut, Massachusetts, New York, Rhode Island, and the District of Columbia, for example, provide many borrowers who face a financial hardship due to coronavirus the opportunity to get a forbearance.
Contact your loan servicer, talk to a lawyer, or speak to a HUD-approved housing counselor to find out what options you have. You can also check your state government's website to find out about available mortgage assistance. If you're able to work something out with the servicer, the law prohibiting adverse credit reporting applies.
If you need a more permanent solution, say after a forbearance period ends, you may apply for a loan modification or another option. Fannie Mae and Freddie Mac offer eligible homeowners modifications, often after a forbearance. Homeowners with FHA-insured loans have access to FHA's suite of loss mitigation options. VA-backed loans can be modified as well. If you have another type of loan, most banks and mortgage lenders offer in-house ("proprietary") modifications.
Under federal law, the servicer generally doesn't have to review more than one loss mitigation application from you unless you bring the loan current after applying. But considering what's happening with COVID-19, even if you already applied, it's worth contacting the servicer again to find out if help is available. If your loan is owned or insured by Fannie Mae, Freddie Mac, FHA, VA, or the Rural Housing Service, you can contact that entity too to find out about mortgage-payment relief.
To get specific information about what kind of relief is available in your circumstances, contact your loan servicer. A local foreclosure lawyer can advise you about your legal rights under federal mortgage servicing laws and tell you about any state laws that could protect you as well. A HUD-approved housing counselor can provide you with helpful information (at no cost) about different loss mitigation options.