Are you ready to start making the mortgage payments again?
Updated: Jun 18
What to know about the Federal Foreclosure Moratorium under CARES.
The foreclosure moratorium could be expiring at some point in 2021. For homeowners who couldn’t make their mortgage payments, there is vague guidance on how they can smoothly restart making payments.
What information do homeowners and communities need to know as we transition back to everyday life after COVID-19?
The Federal foreclosure moratorium was only available to homeowners with government-backed loans. The federal government backs seventy percent of the residential mortgages through FreddieMac, Fannie Mae, Veterans Association, USDA, and FHA insured. The remaining thirty percent of privately backed borrowers may have options, but the eligibility criteria varies on a loan-by-loan basis.
The moratorium offers eligible homeowners a forbearance period. The Coronavirus Aid, Relief, and Economic Security (CARES) Act defines Forbearance as when the mortgage servicer, that is, the company that sends the mortgage statement and manages the loan, pauses or reduces the payments for a limited period of time. Forbearance does not erase what is owed.
CARES first determines that a residential home loan is federally backed. Then CARES sets out a list of criteria for a borrower to qualify for Forbearance. To request a COVID-19-related forbearance under the CARES Act, the borrower needs to attest to the mortgage servicer that they suffered a financial hardship directly or indirectly from the virus.
Borrowers under the CARES act are entitled to a 180-day automatic forbearance and may request an additional 180 days. Due to recent extensions to the CARES Act, those who initially participated in the federal moratorium may be eligible for up to 540 days of Forbearance if their income continues to be affected by the pandemic.
At the initial request for CARES coverage, the servicer does not ask for hardship documentation to institute the forbearance period. Importantly CARES applies to all federal-backed borrowers. Even if the loan is delinquent, borrowers are eligible to be accepted into the CARES forbearance program.
CARES Act prevents adverse reporting to the credit bureaus during the time of Forbearance. The loan servicer will report the loan as current. Forbearance under the CARES Act will not negatively impact the borrower’s future ability to borrow money.
If someone is buying a new home during the moratorium, the lender will ask them to sign a Covid Attestation that their income has not been impacted, and that the will not require Forbearance.
It is important to remember that forbearance is not forgiveness. Borrowers will need to restart payments and make payments timely if they want their credit to remain unaffected.
At the end of the forbearance period, several options are available for homeowners to select from to restart their mortgage payments. FannieMae has outlined the following options for homeowners:
Option 1: Reinstatement: A reinstatement means that the total forbearance amount is paid all at once.
Option 2: Repayment Plan: A repayment plan allows borrowers to bring the mortgage current over time (up to 12 months) by making additional monthly payments and regular monthly mortgage payments during the one-year following forbearance period.
Option 3: COVID-19 Payment Deferral: A COVID-19 payment deferral allows one to bring the mortgage current by delaying repayment of forbearance amounts without changing other terms of the mortgage. This option may be available if the borrower cannot afford
a reinstatement or repayment plan. The borrower is not charged interest on the forbearance amounts, which will be due and payable at the mortgage loan's maturity or earlier if the property is sold or transferred, refinanced, or paid off.
Option 4: Loan Modification: A loan modification permanently changes the terms of the original loan. It is intended to make the payments or terms more manageable and typically results in a lower monthly payment.
Option 5: Refinance: If forbearance is resolved or is in the process of resolving, the borrower may be eligible to refinance the loan.
A few more essential details to know about the Federal Mortgage Moratorium under CARES.
1. If a borrower restarts mortgage payments and is impacted again by COVID economic issues and has not used the entire time period allowed by law, the forbearance period may restart. 2. Alternatively, suppose the borrower cannot restart the payments at the end of the Forbearance Period. In that case, servicers may send a Borrowers' Response Package (BRP) to see what else may be done to assist borrowers in keeping up with their mortgage obligations.
3. Multi-Family unit loans may be eligible for forbearance. The borrower (landlord) is obligated to inform the tenants of their options under the CARES act, not charge late fees or fines for non-payment or rent, and give at least a 30-day notice to vacant. Rent, just like the mortgage payments, remains due from the tenant. Landlords can sue for unpaid rent. Landlords cannot evict for unpaid rent until after the moratorium expires. See our website for more CARES-related tenant information.
Michelle Ali, of Coldwell Banker Realty in Broward County, who helped many homeowners avoid foreclosure in the last mortgage crisis, is concerned that vulnerable homeowners won’t know these options and could end up facing foreclosure.
The CARES Act gave homeowners security during uncertain times. As we emerge from this pandemic and communities start to reopen and restart everyday life, we must help each other understand how to best resume mortgage payments and to restart life. Neighbors sharing much-needed information with their community is a good place to start, and this article and its information helps in that restart.
Below are several site links for additional information and visit our website
www.smithbarbara.com/real-estate to print handouts from various government sources to assist you in navigating the road forward post CARES Act forbearance.
Attorney Renee Marie Smith is a 24-year Real Estate industry expert, author of “My Guru’s” book series listed on Amazon.com, 2012 Host of Fox29 TV’s Short Sale Guru Show and her education series is approved in Nevada & Florida for realtors’ continuing credits. Renee has counseled thousands of distressed property owners, agents, and advocates throughout the country. She is a guest speaker at conventions, as well as radio. She is nationally published by numerous magazines & blogs, including HuffPost, Mortgage.Orb and Forbes.
sfhglpServicing@usda.gov or (202) 720-1452