Mortgage and Foreclosure Relief Under the Federal CARES Act

The federal stimulus plan gives homeowners who have a “federally backed mortgage loan” the opportunity to get a forbearance, as well as protects them from foreclosure.

Under the federal stimulus plan, called the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which President Trump signed into law on March 27, 2020, 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 that will last at least 60 days, starting March 18, 2020.

What Is a “Federally Backed Mortgage Loan”?

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.

How to Figure Out If You Have a Federally Backed Mortgage Loan

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:

  • To find out if your loan is FHA-insured, look for an FHA case number on the mortgage contract. Sometimes, though, loans lose their FHA-insured status. Call your servicer or HUD’s National Servicing Center at 877-622-8525 if you have questions about your loan's status. You can also check your billing statement to see if you pay a mortgage insurance premium (MIP). MIP is what FHA calls its mortgage insurance. If you’re paying MIP, then you have an FHA-insured loan.
  • To find out if you have a Fannie Mae or Freddie Mac loan, use the Fannie Mae and Freddie Mac loan-lookup tools online.
  • To find out if you have a VA loan, look at the paperwork, including the promissory note and mortgage, you received when you closed the loan. These documents will identify your loan as a VA loan, and you will have paid fees to the VA, which should be noted in closing documents.
  • Borrowers with mortgages that the U.S. Department of Agriculture’s Rural Home Service (RHS) directly extended should be familiar with the agency. Homeowners with privately-serviced RHS-guaranteed loans, however, sometimes don't know their loan’s status. If you think you have a RHS-guaranteed loan, you can ask your servicer to confirm.

Right to Request a Forbearance

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. (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.

No Extra Interest, Fees, or Penalties

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.

How to Get a Forbearance

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 (the sooner of December 31, 2020, or the termination date of the COVID-19 national emergency declaration). To get a forbearance extension, you have to ask for it during the covered period and before your initial forbearance period ends.

To learn more about what relief might be available if you can't pay your mortgage because of the coronavirus outbreak, especially if you aren't covered by the CARES Act, see How to Get Mortgage Payment Relief During the Coronavirus Outbreak.

Foreclosure Moratorium Starting March 18, 2020

The CARES Act sets a 60-day foreclosure moratorium beginning on March 18, 2020, for federally backed mortgage loans. This directive is basically in line with earlier foreclosure suspensions that HUD, Freddie Mac, and Fannie Mae implemented.

Under the Act, the servicer may not initiate any judicial or nonjudicial foreclosure process, move for a foreclosure judgment or order of sale, or execute a foreclosure-related eviction or foreclosure sale for not less than the 60-day period beginning on March 18, 2020.

The moratorium covers the majority of residential mortgage loans in the country. Vacant and abandoned properties aren't included, though.

Effective date: March 27, 2020