The federal stimulus plan gives homeowners who have a “federally backed mortgage loan” the opportunity to get a forbearance and protects them from foreclosure.
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.
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:
- insured by the Federal Housing Administration (FHA)
- insured under section 255 of the National Housing Act
- guaranteed under section 184 or 184A of the Housing and Community Development Act of 1992
- guaranteed or insured by the Department of Veterans Affairs (VA)
- guaranteed, insured, or made by the Department of Agriculture, or
- purchased or securitized by Fannie Mae or Freddie Mac.
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. 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.
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. To get a forbearance extension, you have to ask for it during the covered period and before your initial forbearance period ends.
What Is the Covered Period?
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.
Foreclosure Moratorium
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