The Consolidated Appropriations Act (CAA), 2021, which became law Dec. 27, 2020, contains several provisions that impact housing.
The recently enacted Coronavirus, Aid, Relief, and Economic Security Act (CARES Act) directs lenders holding federally-backed mortgages to suspend borrowers' payments for up to a maximum of 360 days if they have experienced financial hardship due to the Coronavirus outbreak.
Number of homeowners who are 30-days past due on mortgage payments are not in a forbearance program.
The law also suspended foreclosure and foreclosure-related eviction actions until December 31, 2020 and then further until Jan. 31, 2021, but was extended by President Biden's executive order until March 31, 2021. Moreover, provisions in the CARES Act include withholding of negative credit reporting if relief has been granted.
- If your mortgage is backed by the federal government, provisions of the 2020 CARES Act can allow you to potentially suspend payments for up to 360 days if you have experienced financial hardship.
- Under the CARES Act legislation, you will not be charged late fees or reported to credit bureaus.
- Foreclosures and evictions of eligible loans were halted until December 31, 2020 but were extended by President Biden's executive order on his first day in office until March 31, 2021.
- If your loan is not federally backed, you can contact your loan servicer, state government, or local authorities to find out what options you have.
Provisions of the CARES Act regarding forbearance and foreclosure pertain to mortgage loans backed by the federal government and Government Sponsored Enterprises, which are defined as loans :
- Insured by the Federal Housing Administration (FHA)
- Insured under section 255 of the National Housing Act, which involves home equity conversion mortgages administered by the Department of Housing and Urban Development (HUD)
- Guaranteed under section 184 or 184A of the Housing and Community Development Act of 1992, which targets Indian families and Hawaiian housing
- Guaranteed or insured by the Department of Veterans Affairs
- Guaranteed, insured, or made by the Department of Agriculture
- Purchased or securitized by the Federal Home Loan Mortgage Corporation (Freddie Mac) or the Federal National Mortgage Association (Fannie Mae)
Federally eligible mortgages may be held by residential owners as well as landlords and other commercial owners. The rules differ for residential mortgage borrowers vs. multi-family property owners.
If you received CARES Act mortgage relief, your initial 180-day forbearance may be set to expire soon. You may request an additional up to 180-day extension through your loan servicer, but you MUST apply.
Paused Payments (Forbearance)
The CARES Act directs that if a residential borrower is experiencing financial hardship due to COVID-19, you can be granted forbearance on your federally-backed mortgage loan for up to 180 days, with the option to extend for another 180 days (potential relief for a total of 360 days).
Landlords of multi-family property mortgages can also receive relief. The CARES Act allows a 30-day forbearance for multi-family mortgages, and up to two 30-day extensions.
If you are offered forbearance under the CARES Act or by any lender, carefully review the terms before signing. The best is just to have the missing payments added to the end of your mortgage term. Some lenders, particularly from the private sector, may have special terms that may only defer payments for a short time and require a balloon payment.
Mortgage lending discrimination is illegal. If you think you've been discriminated against based on race, religion, sex, marital status, use of public assistance, national origin, disability, or age, there are steps you can take. One such step is to file a report to the Consumer Financial Protection Bureau or with the U.S. Department of Housing and Urban Development (HUD).
How to Request Forbearance
As a borrower with a federally-backed mortgage loan, you will need to contact your loan servicer (the company you make payments to) to file a request claim. You do not need to submit extensive documentation, mainly only affirmation of your financial hardship on a standardized forbearance request claim form.
Landlords of multi-family units must have been current on payments as of February 1, 2020, to be approved for forbearance relief. If applicable, landlords should submit an oral or written request to their servicer who can approve a 30-day forbearance. Federally-backed multi-family mortgages can also be eligible for up to two additional 30-day forbearance periods.
How to Request a Forbearance Extension
As with your original forbearance request, you also have the right to request an extension of up to another 180 days (for a total of up to 360 days). You must contact your loan servicer to request this forbearance extension. The extension is not automatic. No additional fees, penalties or interest (beyond scheduled amounts) will be added to your account. You do not need to submit additional documentation other than your claim to have a pandemic-related financial hardship.
Right to Halt Forbearance
As a borrower, the CARES Act gives you the right to halt forbearance at any time. This applies to you if you have a government-backed loan on a regular residential property or a multifamily building.
No Extra Penalties, Interest, or Late Fees
During any forbearance period granted to you, your servicer cannot charge any penalties, interest, or fees that 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 granted to the landlord.
No Reporting to Credit Bureaus
Lenders are directed not to report you to credit bureaus for late or missed payments, provided you are in one of the forbearance programs. This means the fact you are not making full payments or not paying at all, will not affect your credit rating.
No Foreclosures or Evictions
The moratorium on foreclosures and evictions for federally-backed mortgages runs through December 31, 2020. Landlords cannot evict renters during any period in which they are granted forbearance.
Additional Help Possible
Once you reach the end of your forbearance period, you may qualify for additional assistance if you need it. Work with your servicer and, if possible, resume making your regular payments. If you still need assistance, ask your servicer what other options are available. This could include reducing your monthly payments or some other type of loan modification.
In the event you and your lender reach agreement on any loan modification, you cannot be reported to credit bureaus as "not current" on that loan.
How to Find Out If Your Loan Is Federally Backed
To find out whether your loan is backed by the federal government, making you eligible for the help noted above, here are some actions you can take:
- 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 whoever owns your mortgage.
- Check online. Use loan lookup tools provided by Fannie Mae or Freddie Mac to find out if either of those two government-backed providers own your mortgage.
- Check the Mortgage Electronic Registration Systems (MERS) website to find your servicer if you don't know who that is.
What If You Have a Non-Government-Backed Mortgage
Federal regulators believe most non-government-backed lenders and servicers will adopt policies similar to those mandated by the CARES Act. To find out, contact your loan servicer, ask what programs they have in place to help homeowners impacted by the Coronavirus outbreak, and follow any instructions you are given.
Although the CARES Act does not require private lenders to offer relief, if you and your lender come to any type of loan modification agreement, the law regarding not reporting reduced or paused payments to credit bureaus does apply to you.
Don't Just Stop Making Payments
If you are in a distressed situation, you may have more options than you realize. Whether your loan is backed by the federal government or a private lender, the one thing you should not do is to just stop making payments. You must contact your lender or servicer to let the company know you are having trouble making payments. Failure to contact your lender could result in many negative consequences such as additional charges, delinquent credit reports, and ultimately, possible foreclosure and eviction.