The CARES Act – Mortgage Forbearance Relief Breakdown

Last Week in Review: Coronavirus Fallout to Hit Homeowners

The Coronavirus has impacted millions of Americans across the country due to job loss and furloughs making it difficult, and sometimes impossible, for homeowners to make their mortgage payments.

The U.S. government has stepped in to offer homeowners financial relief during this unprecedented time with the Coronavirus Aid, Relief, and Economic Security (CARES) Act. With this new Act, government-sponsored agencies such as Fannie Mae and Freddie Mac will offer forbearance agreements with protections for those homeowners in need.

What is a forbearance? A forbearance is an agreement between a homeowner and their mortgage servicer (to whom they send their mortgage payments) to suspend payments for a period of time. The homeowner does not incur late fees or other penalties during the forbearance.

Additionally, mortgage terms are unchanged, and the homeowner agrees to make up the accrued interest and payments in the future. Typically, a forbearance will affect a homeowner’s credit rating, however, there are a few differences in forbearances during COVID-19 which can be found on the Fannie Mae and Freddie Mac websites.

Loan servicers have been instructed to provide mortgage relief options which include:

• Ensuring payment relief by providing forbearance for up to 12 months.
• Waiving assessments of penalties or late fees.
• Halting of foreclosures and evictions of borrowers living in homes owned by the mortgage servicer until at least May 17, 2020 (Freddie Mac).
• Suspending the reporting to credit bureaus of past due payments of those in forbearance due to the COVID-19 emergency.
• Offering loan modifications for payment relief to keep mortgage payments the same after the forbearance period.
• Borrowers are eligible regardless of whether their property is an investment, second home, or owner-occupied.

Bottom line: homeowners who have the ability to pay their mortgage should do so. Homeowners who are unable to, should contact their mortgage servicer immediately and request assistance on forbearance under the new CARES Act.