On March 27, the Coronavirus Aid, Relief and Economic Security (CARES) Act was signed into law. The legislation is a $2 trillion economic relief bill that includes several consumer protections for Americans impacted by the coronavirus pandemic.
One key provision allows struggling homeowners to delay their mortgage payments for up to 12 months with a mortgage forbearance agreement. A forbearance is when a lender or loan servicer allows you to pause or lower your mortgage payments for a period of time, however, the missed payments must be repaid later.
The mortgage relief outlined in the CARES Act applies to federally backed mortgages, including conventional loans owned by Fannie Mae and Freddie Mac, as well as FHA, VA and USDA loans, according to the CFPB. Here are key provisions of the CARES Act:
- The right to request mortgage forbearance for up to 180 days and one extension for an additional 180 days.
- A freeze of additional fees and interest charges during the forbearance period.
- The suspension of negative credit reporting for borrowers who were current on payments before their forbearance.
- A 60-day moratorium on new and in-process foreclosures, which started after March 18 and is in effect at least through June 30.
- A 120-day moratorium on evictions for tenants renting from a landlord with a federally backed mortgage, which began March 27.
New payment deferral option
Fannie Mae and Freddie Mac, two government-sponsored enterprises that buy and sell most mortgages in the U.S., announced on May 13 a new repayment option for borrowers in forbearance due to the COVID-19 pandemic.
The “COVID-19 payment deferral” option allows borrowers to resume their regular mortgage payments after their forbearance period ends, and add the delayed payments to the end of their loan term. Mortgage servicers of Fannie and Freddie-owned loans will begin offering this option July 1.
How to get help
Borrowers need to work with their lender or servicer to demonstrate that the COVID-19 pandemic has led to job loss, income reduction, illness or another hardship to qualify for mortgage relief.
While you may not be required to provide documentation, it’s still a good idea to gather supporting paperwork, such as:
- A written notification of a layoff
- Pay stubs confirming reduced hours
- Medical bills
FYI: Lenders are experiencing high call volumes during the coronavirus pandemic. Visit your lender’s website to learn about current mortgage relief options and how to apply for help.
Additional details on federally backed mortgage relief options
Aside from the CARES Act protections, Fannie Mae normally offers these relief options for homeowners in financial distress:
- The ability to suspend or reduce your monthly mortgage payments for up to one year in increments of up to six months.
- No late fees during your forbearance period.
- Repayment options after forbearance ends, such as a gradual repayment plan or a loan modification.
As the other GSE that fuels the mortgage market in the U.S., Freddie Mac offers relief protections for the loans it owns by:
- Providing forbearance for up to one year.
- Not charging late fees or other penalties.
- Offering the option to either maintain previous mortgage payments or request a loan modification after the forbearance period ends.
NOTE: Borrowers who have mortgages owned by Fannie Mae or Freddie Mac — and have made three consecutive, on-time payments after their forbearance period ends — are eligible to refinance their mortgage or qualify for a new one, the GSEs announced May 19.
Those who continued to make mortgage payments while in forbearance are also eligible for a new or refinanced loan. This may be especially helpful for homeowners who want to take advantage of recent record-low mortgage rates.
Backed by the Federal Housing Administration, FHA loans have additional relief options, outside of what’s included in the CARES Act. For example, FHA lenders won’t require a lump-sum repayment of what’s owed after your forbearance period ends.
You may be able to get a “standalone partial claim” for the unpaid principal, which is a no-interest second mortgage that wouldn’t be due until your loan is paid off. You must have been less than 30 days behind on your mortgage as of March 1 to qualify, however. Other foreclosure prevention options can be found on the Department of Housing and Urban Development’s (HUD) website.
Guaranteed by the U.S. Department of Veterans Affairs, VA loans have several mortgage relief programs in addition to CARES Act protections, including a repayment plan for those already behind or a loan modification. Visit the VA’s website for more info.
Insured by the U.S. Department of Agriculture, USDA loans offer mortgage relief that aligns with the assistance outlined in the CARES Act. Homeowners can get payment forbearance for an initial 180 days and may request one extension up to 180 days, if needed. USDA lenders must offer a written repayment plan at the end of the forbearance period, which might include extending the loan term by the length of the forbearance period. Other relief options can be found online in the USDA handbook.
How to find your current loan servicer
Mortgages are often sold after closing, so the lender who provided you with the loan then may not be the same company that services the loan currently. If you have a conventional loan, here’s how to figure out who owns it.
You can use Fannie Mae’s online loan lookup tool or call 1-800-2FANNIE from 8 a.m. to 8 p.m. ET. Visit Know Your Options to learn more about Fannie Mae’s foreclosure assistance programs.
You can search for your loan using Freddie Mac’s mortgage lookup tool, or 1-800-FREDDIE from 8 a.m. to 8 p.m. ET. Visit Freddie Mac’s My Home for additional mortgage relief help.
What to do if you don’t have a federally backed mortgage
If your mortgage is not a government-insured loan or isn’t owned by Fannie Mae or Freddie Mac, contact your servicer directly to see what mortgage relief programs they may have in place. Review your latest mortgage statement
to find your current servicer’s name and contact information.