The Coronavirus Aid, Relief, and Economic Security (CARES) Act provides many homeowners with protection against foreclosure, as well as the right to pause mortgage payments during times of financial hardship.
A federal law put in place during the COVID-19 pandemic offers two protections for homeowners with federally or Government Sponsored Enterprise (GSE) backed mortgages.
How To Determine Eligibility:
In order to qualify, you must first determine who services your mortgage and confirm that it is a federally backed mortgage. In some instances, mortgage loans are sold and the servicer you pay monthly may not own your mortgage.
First or second mortgages on 1–4 family homes (including cooperative and condominium units) issued, purchased, or backed by the following agencies qualify for assistance:
- Fannie Mae or Freddie Mac
- U.S. Department of Veterans Affairs (VA)
- Federal Housing Administration (FHA), including home equity conversion (HECM) reverse mortgages, and mortgages under the Indian Home Loan Guarantee program
- U.S. Department of Agriculture (USDA)
If you are unsure who owns your mortgage you can call your servicer who has an obligation to provide you with details about who owns and/or backs your mortgage loan. You can also look up your mortgage servicer by searching the Mortgage Electronic Registration Systems (MERS) website.
The CARES act offers two protections for homeowners experiencing financial hardship:
Foreclosure Protection for Federally Backed Mortgages
Foreclosure is when the lender takes back a property after the homeowner is unable to make required mortgage payments. Under the CARES Act, your lender or loan servicer is restricted on when they can finalize a foreclosure judgement, eviction, or sale of your home.
In many cases, this restriction is in place until August 31, 2020 and may be extended past that timeline. Contact your mortgage provider for the most up to date information about foreclosure policies under the CARE Act.
Forbearance for Federally Backed Mortgages
Forbearance is a pause or reduction in monthly mortgage payments. If you are experiencing financial hardship due to the coronavirus pandemic, you can request and obtain a forbearance for 180 days. You are entitled to request an additional 180 days if needed (for up to 360 days total).
Under the CARE Act there will be no additional fees, penalties or interest (beyond previously agreed amounts) added to your mortgage. Make sure you clarify how your servicer will expect the forbearance is repaid (ie. all at once, or in small monthly payments).
Qualifying for forbearance means you agree to repay any missed or reduced payments when your financial situation improves. At the end of the forbearance period your servicer will contact you to discuss the different repayment programs available.
If you don’t have a federally backed mortgage, you still may have relief options through your state and/or mortgage loan servicer. Visit your state’s government website for more details.