The Coronavirus, Aid, Relief, and Economic Security (CARES) Act, passed in 2020, directed that lenders that held federally backed single-family mortgages had to suspend borrowers’ payments for up to a maximum of 360 days if they experienced financial hardship due to the coronavirus outbreak. Similar but shorter forbearance of 90 days was available to owners of multifamily units with federally backed mortgages.
Subsequent legislation, including the Consolidated Appropriations Act, 2021, the American Rescue Plan Act of 2021, and presidential executive actions resulted in additional mortgage relief in the wake of the 2020 financial crisis.
Key Takeaways
- The provisions of the 2020 CARES Act and subsequent legislation allowed you to potentially suspend payments for up to 18 months if you experienced financial hardship related to the financial crisis of 2020 and your mortgage is backed by the federal government.
- You could apply for initial mortgage relief if your loan is backed by the U.S. Department of Housing and Urban Development (HUD), the Federal Housing Administration (FHA), the U.S. Department of Agriculture (USDA), the U.S. Department of Veterans Affairs (VA), or if you're the owner of a multifamily rental unit with a loan backed by the government.
- The foreclosure moratorium on federally-backed loans expired on July 31, 2021.
- Borrowers could then enroll in forbearance to get mortgage relief through Sept. 30. 2021.
- The Coronavirus Aid, Relief, and Economic Security (CARES) Act legislation provides that you will not be charged late fees or be reported to credit bureaus for late or non-payments during these time periods.
Affected Mortgages
COVID-19 mortgage relief applied to loans backed by the federal government and government-sponsored enterprises (GSEs). These are loans that are:
- Insured by the Federal Housing Administration (FHA)
- Insured under Section 255 of the National Housing Act, which includes home equity conversion mortgages administered by the U.S. Department of Housing and Urban Development (HUD)
- Guaranteed under Section 184 or 184A of the Housing and Community Development Act of 1992 that targets American Indian families and Hawaiian housing
- Guaranteed or insured by the U.S. Department of Veterans Affairs (VA)
- Guaranteed, insured, or made by the U.S. Department of Agriculture (USDA)
- Purchased or securitized by the Federal Home Loan Mortgage Corp. (Freddie Mac) or the Federal National Mortgage Association (Fannie Mae)
Federally-eligible mortgages can be held by residential owners as well as by landlords and other commercial owners. The rules differed for residential mortgage borrowers versus multifamily property owners.
If You Are Behind on Your Mortgage Payments
Call your lender and apply for a foreclosure avoidance option like a mortgage modification right away. Don't abandon your property and be sure to respond to inquiries from your lender. It can foreclose if you abandon your property or are unreachable for more than 90 days. Contact a HUD-approved housing counselor if you're overwhelmed by your options. They're located in every state and will work with you free of charge to help you prevent foreclosure.
Find Out If Your Loan Is Federally Backed
Find out whether your loan is backed by the federal government, making you eligible for help:
- Call or write your mortgage servicer. Your servicer is required to tell you who owns your mortgage and provide you with the name, address, and phone number of that owner.
- Check online. Use loan lookup tools provided byFannie MaeorFreddie Macto find out if either of these government-backed providers owns your mortgage.
- Check theMortgage Electronic Registration Systems (MERS) website to find your servicer if you don’t know who it is.
Mortgages That Aren't Backed by the Government
Most lenders and loan servicers that aren't backed by the government have adopted policies over the years that are similar to those mandated by the CARES Act and subsequent legislation. Contact your loan servicer to find out what it might offer. Ask what programs it has in place to provide mortgage relief to homeowners who were impacted by the coronavirus outbreak and follow any instructions you're given.
The CARES Act doesn't require that private lenders must offer mortgage assistance but the law regarding not reporting reduced or paused payments to credit bureaus does apply to you if you and your lender have come to any type of loan modification agreement.
Mortgage Forbearance (Paused Payments)
You were eligible to pause your mortgage payments for up to 18 months (including extensions) in a process known as forbearance if you're a homeowner with a government-backed mortgage and have experienced COVID-19-related financial hardship.
- 18 months of total forbearance if your mortgage is backed byFannie Mae or Freddie Mac. You must have been in an active forbearance plan as of Sept. 30, 2021 to be eligible. The maximum forbearance is 12 months otherwise.
- You can request up to 18 months of total forbearance if your mortgage is backed by HUD/FHA,USDA, or theVA. You must have requested an initial forbearance plan on or before Sept. 30, 2021 to qualify. The maximum forbearance is 12 months otherwise.
The Federal Housing Finance Agency (FHFA) announced an extension of the forbearance deadline if you owned a multifamily rental property with a loan backed by the federal government on Sept. 24, 2021. If you are granted forbearance for the multifamily property, you must:
- Inform your tenants in writing about protections available to them during forbearance.
- Agree not to evict them for nonpayment of rent while your property is in forbearance.
- Give tenants at least a 30-day notice to vacate for other reasons.
- Agree not to charge late fees or penalties for nonpayment of rent.
- Allow tenants flexibility in repaying past-due rent over time rather than in a lump sum.
Carefully review the terms before signing if you're offered forbearance under the CARES Act or by a private lender. It’s best to have the missing payments added to the end of your mortgage term. Some lenders, particularly those from the private sector, may have special terms that will only defer payments for a short time and then require a balloon payment.
Mortgage lending discrimination is illegal. There are steps you can take if you believe that you've been discriminated against based on your race, religion, sex, marital status, use of public assistance, national origin, disability, or age. One option is to file a report with the Consumer Financial Protection Bureau (CFPB) or with HUD.
How to Request Forbearance
As a homeowner with a federally backed mortgage loan, you must contact your loan servicer (the company to which you make payments) to request forbearance. You don't have to submit extensive documentation, just affirmation of your financial hardship. You can do this over the phone. Your initial forbearance can be for up to 180 days. You can extend forbearance an additional 180 days or even 360 days, depending on when your initial forbearance period began.
Landlords of multifamily units must have been current on payments as of Feb. 1, 2020 to be approved for forbearance relief. They should submit an oral or written request to their servicer who can approve the initial 30-day forbearance with subsequent extensions of up to an additional 60 days.
The CARES Act gives borrowers the right to stop forbearance at any time if you have a government-backed loan on a regular residential property or a multifamily building.
What Does Forbearance Do?
Your servicer cannot charge any penalties, interest, or fees during any forbearance period granted to you if they would not have been charged if you had made your payments on time and in full. Landlords may not charge tenants any fees or penalties for late payment of rent during any forbearance period that's granted to the landlord.
Lenders are directed not to report you to credit bureaus for late or missed payments provided that you're in one of the forbearance programs. The fact that you're not making full payments or not paying at all won't affect your credit rating.
Aug. 26, 2021
A nationwide eviction moratorium ordered by the Centers for Disease Control (CDC) was struck down by the U.S Supreme Court on Aug. 26, 2021 but several states, including New York, California, and New Jersey, have extended their statewide eviction moratoriums.
Additional Assistance
You might qualify for additional assistance when you reach the end of your forbearance period or if you didn't act in time. Work with your servicer and resume making your regular payments as soon as possible. Ask your servicer what other options are available if you still need assistance. This could include reducing your monthly payments or some other type ofloan modification.
You cannot be reported to credit bureaus as being “not current” on that loan if you and your lender reach an agreement on any loan modification.
Financial Help for Homeowners and Landlords
Forbearance is not the same as forgiveness. Forbearance only puts off the inevitable day when paused payments must be made up.
Programs funded by the Consolidated Appropriations Act of 2021 and the American Rescue Plan Act of 2021 provide financial assistance to homeowners and landlords under two programs: the Homeowner Assistance Fund and the Emergency Rental Assistance program.
Homeowner Assistance Fund
The Homeowner Assistance Fund (HAF) was created to prevent mortgage delinquency, defaults, foreclosures, loss of utilities, and the displacement of homeowners. The use of funds is prioritized for homeowners who have experienced the greatest hardships. Guidance on the use of the fund was updated on Nov. 12, 2021 to extend deadlines for applying for funds through Dec. 15, 2021 for certain areas. Funds could be used for:
- Assistance with mortgage payments
- Homeowners insurance
- Utility payments
- Other specified purposes
Emergency Rental Assistance Program
The Emergency Rental Assistance (ERA) program provides funding to help renters who are unable to pay rent or utilities. The funds are provided directly to states, U.S. territories, local governments, American Indian tribes, Tribally Designated Housing Entities, and the Department of Hawaiian Home Lands. These entities may use ERA funds to provide assistance through existing or newly-created rental assistance programs.
The Treasury disburses ERA funds to states and other entities so you must apply for ERA assistance through the appropriate state or entity.
Does a Mortgage Stimulus Program Exist?
There is no federally-backed mortgage stimulus program. It's either a cleverly designed mortgage refinancing advertisem*nt or outright spam if you see an ad for a "new 2023 mortgage stimulus payment" or something of that nature.
What Has President Biden Done to Offer Mortgage Relief?
According to a White House press release: "Shortly after taking office, the Biden-Harris Administration extended the foreclosure moratorium and mortgage forbearance enrollment period for homeowners with government-backed mortgages to provide relief to struggling homeowners."
Part of President Biden's American Rescue Plan provided $9.961 million to the Homeowner Assistance Fund, encouraging loan modifications and payment reduction options on all federally backed mortgages.
Will My Home Be Foreclosed Upon Now That Forbearance Has Ended?
The forbearance period has ended for most borrowers but the CFPB and the Biden Administration have put rules in place to prevent a massive wave of imminent foreclosures. Lenders are required to allow borrowers several options, including:
- Allowing borrowers to resume mortgage payments and apply their missed payments to the end of their mortgage
- Lower their monthly mortgage payments through streamlined loan modification
- Allowing borrowers to sell their homes
Be alert for additional options and restrictions provided by the federal government or your state.
The Bottom Line
Don't just stop making payments because you may have more options than you realize if you're in a distressed situation. Contact your lender or servicer to let the company know that you're having trouble making payments. Failure to contact your lender could result in many negative consequences, such as additional charges, delinquent payments on your credit reports, and possible foreclosure and eviction. The forbearance period may be over but help is still available.
