What options do I have for dealing with my mortgage during COVID?
In March, 2020, the United States enacted the CARES Act which contains a number of provisions to help Americans through the Coronavirus Pandemic. The CARES Act contained two important provisions aimed at helping Americans keep their homes during the COVID pandemic:
- Foreclosure Moratorium: For many federally backed (VA, HUD, FHA, and USDA backed mortgages) and Government Sponsored Entity backed (Fannie Mae, Freddie Mac) mortgages (which by some measures cover over 80% of all home mortgages in the United States), are prohibited from beginning or finalizing a foreclosure against the homeowner. (You can find out if your mortgage is federally backed online at: https://www.knowyouroptions.com/loanlookup (for Fannie Mae loans) or https://ww3.freddiemac.com/loanlookup/ (for Freddie Mac loans)) This prohibition on foreclosure lasts at least through December 31, 2020. What this means is that most home mortgages cannot be foreclosed upon during the Coronavirus pandemic. This is an important protection, but if you are a homeowner and are behind on your mortgage, you should look into your options for obtaining a mortgage forbearance or modification.
- Mortgage Forbearance: A mortgage forbearance is when the mortgage servicer (who you pay the mortgage payments to each month) allows you to pause or suspend making mortgage payments for a period of time. These payments are not erased, forgiven, or eliminated, but simply paused. The missed payments must be repaid at some point in the future, but during the forbearance, no additional fees, costs, penalties or additional interest can be charged (other than the normal monthly interest). If a homeowner experiences a financial hardship due to the Coronavirus pandemic, the homeowner has the right to request and obtain a forbearance from the homeowner’s mortgage company if the homeowner’s mortgage is a federally-backed or Government Sponsored Entity backed mortgage. The homeowner has the right to a forbearance for 180 days, and obtain an extension for an additional 180 days. The homeowner must contact their loan servicer to request a forbearance. The homeowner needs to claim that they have a COVID pandemic related hardship, and make the request. The mortgage servicer must grant this forbearance regardless of the mortgage delinquency status. If during the period of forbearance your income returns to normal or you become able to make your regular monthly payments, you can contact your servicer to resume your regular contractual payments.
At the end of your forbearance, your servicer will contact you to discuss your options for repaying the payments missed during the forbearance. These options will be discussed in the next blog post in this series, available here.
If you have questions about forbearance and your options, please contact Prescott, Pearson & Tande, PA.