The Coronavirus, Aid, Relief, and Economic Security (CARES) Act directed lenders holding federally backed single-family mortgages 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 (90 days) forbearance was available to owners of multifamily units with federally backed mortgages.
Subsequent legislation, including the Consolidated Appropriations Act, 2021 and the American Rescue Plan Act of 2021, as well as presidential executive actions, have resulted in additional mortgage relief in the wake of the 2020 financial crisis.
- If your mortgage is backed by the federal government, provisions of the 2020 CARES Act and subsequent legislation allow you to potentially suspend payments for up to 18 months if you experience financial hardship related to the financial crisis of 2020.
- You can 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), or the U.S. Department of Veterans Affairs (VA), or if you are the owner of a multifamily rental unit with a loan backed by the government.
- There is no deadline to apply for initial forbearance for homes backed by Fannie Mae and Freddie Mac.
- The foreclosure moratorium on federally backed loans expired on July 31, 2021.
- Borrowers could enroll in forbearance to get mortgage relief through Sept. 30. 2021.
- Under Coronavirus Aid, Relief, and Economic Security (CARES) Act legislation, you will not be charged late fees or reported to credit bureaus.
- Being in forbearance may allow you to avoid foreclosure.
- 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.
- Both the Consolidated Appropriations Act, 2021 and the American Rescue Plan of 2021 contain additional funding for housing relief.
COVID-19 mortgage relief applies to loans backed by the federal government and government-sponsored enterprises (GSEs) and is 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 U.S. Department of Housing and Urban Development (HUD)
- Guaranteed under Section 184 or 184A of the Housing and Community Development Act of 1992, which 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 may be held by residential owners as well as by landlords and other commercial owners. The rules differ 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.
Do not abandon your property, and make sure you respond to inquiries from your lender. If you abandon your property or are unreachable by your lender for more than 90 days, they can foreclose.
If you are overwhelmed by your options, contact a HUD-approved housing counselor. They are located in every state and will work with you free of charge to help you prevent foreclosure.
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 that 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 owns your mortgage.
- Check the Mortgage Electronic Registration Systems (MERS) website to find your servicer, if you don’t know who it is.
What if you have a non-government-backed mortgage?
Federal regulators believe most non-government-backed lenders and loan servicers will adopt policies similar to those mandated by the CARES Act and subsequent legislation. To find out, contact your loan servicer, ask what programs it has in place to provide mortgage relief to homeowners impacted by the coronavirus outbreak, and follow any instructions you are given.
Although the CARES Act does not require private lenders to offer mortgage assistance, if you and your lender come to any type of loan modification agreement, then the law regarding not reporting reduced or paused payments to credit bureaus does apply to you.
If your mortgage forbearance is set to expire soon, then you may be able to request an extension—but you must apply before forbearance ends.
Mortgage Forbearance (Paused Payments)
If you are a homeowner with a government-backed mortgage and experience COVID-19-related financial hardship, you can pause mortgage payments for up to 18 months (including extensions) in a process known as forbearance.
- If your mortgage is backed by Fannie Mae or Freddie Mac: You may request up to 18 months of total forbearance. To be eligible, you must have been in an active forbearance plan as of Sept. 30, 2021. Otherwise, the maximum forbearance is 12 months.
- If your mortgage is backed by HUD/FHA, USDA, or VA: You may request up to 18 months of total forbearance. To qualify, you must have requested an initial forbearance plan on or before Sept. 30, 2021. Otherwise, the maximum forbearance is 12 months.
If you own a multifamily rental property with a loan backed by the federal government, on Sept. 24, 2021, the Federal Housing Finance Agency (FHFA) announced an extension of the forbearance deadline, with no new deadline at this time.
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 them late fees or penalties for nonpayment of rent.
- Allow tenants flexibility in repaying back rent over time (not in a lump sum).
If you are offered forbearance under the CARES Act or by a private lender, carefully review the terms before signing. It’s best 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 that 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 with the Consumer Financial Protection Bureau (CFPB) or with HUD.
How to request forbearance
As a homeowner with a federally backed mortgage loan, you will need to contact your loan servicer (the company to which you make payments) to request forbearance. You do not need to submit extensive documentation, mainly only affirmation of your financial hardship, which you can do over the phone. Your initial forbearance can be for up to 180 days. Depending on when your initial forbearance began, you can extend forbearance an additional 180 or even 360 days.
Landlords of multifamily units must have been current on payments as of Feb. 1, 2020, to be approved for forbearance relief. If applicable, landlords 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.
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.
What Does Forbearance do?
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 that you are not making full payments or not paying at all will not affect your credit rating.
Aug. 26, 2021
Though the nationwide eviction moratorium ordered by the Centers for Disease Control (CDC) was struck down by the U.S Supreme Court on Aug. 26, 2021, several individual states including New York, California, New Jersey, and others have extended their statewide eviction moratoriums through as late as June 1, 2022.
No foreclosures or evictions
The moratorium on foreclosures and evictions for federally backed mortgages ran through Sept. 30, 2021.
When 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 that you and your lender reach an agreement on any loan modification, you cannot be reported to credit bureaus as “not current” on that loan.
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, 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 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 on applying for funds through Dec. 15, 2021, for certain areas. Funds can be used for:
- Assistance with mortgage payments
- Homeowners insurance
- Utility payments
- Other specified purposes
How to request homeowner assistance funds
Homeowner assistance funds are in the process of being distributed to states for redistribution to homeowners. The U.S. Department of the Treasury has provided guidance for states to use in developing their individual HAF plans.
You will request funds from your state after your state’s HAF plan has been approved and its system is up and running. Meanwhile, the National Council of State Housing Agencies’ Homeowner Assistance Fund webpage features a map showing the status of each state’s HAF to date.
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.
How to request emergency rental assistance
Because the Treasury disburses ERA funds to states and other entities, you must apply for ERA assistance through the appropriate state or entity. To help with this, the Treasury has created a webpage to help tenants and landlords find rental assistance programs in their local area. Use it to direct yourself to the appropriate state or other authority to determine how to apply to receive assistance or to help your tenants do so.
Does a Mortgage Stimulus Program Exist?
There is no federally backed mortgage stimulus program. If you see an ad for a "new 2021 mortgage stimulus payment" or something of that ilk, it is either a cleverly designed mortgage refinancing advertisement or outright spam.
What Has President Biden Been Doing 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." Additionally, as part of President Biden's American Rescue Plan $9.961 has been provided for the Homeowner Assistance Fund, encouraging loan modifications and payment reduction options on all federally backed mortgages.
Can You Modify Your Loan After Forbearance Ends?
Yes. The Consumer Financial Protection Bureau (CFPB) issued a new rule requiring lenders to allow borrowers with certain hardship qualifications to modify their loans through a streamlined process. This rule went into effect on Aug. 31, 2021, and currently extends through Dec. 31, 2021.
Will My Home Be Foreclosed Now That Forbearance Has Ended?
Though the forbearance period has ended for most borrowers, the CFPB and the Biden Administration have put new rules in place to prevent a massive wave of imminent foreclosures. Lenders are required to allow borrowers many 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
If none of those options are possible for borrowers, there are still additional restrictions in place through Dec. 31, 2021. Lenders can only start the foreclosure process if the borrower has abandoned their property, has not responded to inquiries from the lender for more than 90 days (and is more than 120 days behind on payments), or was more than 120 days behind on their mortgage prior to the pandemic (March 1, 2020).
The Bottom Line
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 just stop making payments. You must contact your lender or servicer to let the company know that 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.