Under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, homeowners with federally backed mortgage loans who've been financially affected by COVID-19, regardless of delinquency status, can get a forbearance.
Homeowners with these kinds of loans are also entitled to a foreclosure moratorium.
For the purposes of the protections discussed in this legal update, a "federally backed mortgage loan" is a loan that's 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, and is:
Around two-thirds of the mortgage loans in the U.S. fall within these categories.
Probably the easiest way to find out what kind of loan you have is to call your loan servicer. However, here are a few other ways to find out whether your loan is federally backed:
If you have a federally backed mortgage loan, and you're experiencing a financial hardship that's due directly or indirectly to COVID-19, you get the right to a forbearance. The forbearance period will last up to 180 days and can be extended for up to another 180 days—360 days, or roughly 12 months, total. In some cases, you can extend the forbearance beyond 360 days. (Federally backed mortgage loans on multi-family properties with five or more units, which were current as of February 1, 2020, are eligible for a forbearance of up to 30 days subject to extension for two additional 30-day periods upon the request of the borrower.)
The CARES Act also gives you the right to stop the forbearance earlier.
Interest will still accrue during the forbearance period. But the servicer can't tack additional fees or penalties, or charge interest beyond what would normally be charged to your account as if you made all contractual payments on time and in full under the terms of the mortgage contract.
The servicer also has to report your loan account to the credit reporting agencies as current if you weren't already behind at the time you enter into the forbearance agreement.
Don't just stop making your mortgage payments. To get the forbearance, you have to contact your servicer and affirm that you've suffered a financial hardship due to the COVID-19 emergency. But you won't have to provide any other supporting documentation beyond this attestation. Make your request before the end of the "covered period. To get a forbearance extension, you have to ask for it during the covered period and before your initial forbearance period ends.
The CARES Act doesn't define the term "covered period" during which you can ask for a forbearance. So, the different federal agencies are taking various approaches to deadlines for requesting a forbearance.
The CARES Act set a 60-day foreclosure moratorium beginning on March 18, 2020, for federally backed mortgage loans. The foreclosure moratoriums for federally backed mortgage loans have been extended numerous times.
Or your state or local area, or mortgage company, might have placed a moratorium on foreclosure proceedings.
Effective date: March 27, 2020