Mortgage Payment Forbearance and the CARES Act
The effects of the COVID-19 pandemic are widespread, but the economic impact of shutdowns, distancing, and nonessential businesses has left many people in financial trouble. Fortunately, the CARES Act is providing some provisions and assistance to help those who may have lost their income, including mortgage payment forbearance.
The concept is fairly simple. If you’ve lost your job or business because of the coronavirus, you may be eligible for a forbearance that allows you to temporarily stop making mortgage payments. The balance of these stopped payments will then later be applied to balance, distributed evenly over a 12-month period.
Currently, the CARES Act allows for 180 days of forbearance for people with federally backed mortgages, and homeowners can apply for an additional 180 days after the initial time period has passed. The bill also prohibits lenders from adding any additional fees or penalties.
The Consumer Finance Protection Bureau (CFPB) recommends that homeowners seeking forbearance connect with a housing counselor from an agency approved U.S. Department of Housing and Urban Development (HUD), or calling the HOPE™ Hotline at (888) 995-HOPE (4673). The CPFB provides a tool for finding a HUD approved counselor here.
In fact, the CPFB has some of the most thorough information available about how the CARES Act can help those facing a housing crisis, whether that’s trouble making payments or navigating an impending foreclosure. This expansive guide is a fantastic resource!
If your mortgage is not federally backed, you may still have options. Many lenders are offering programs similar to the provisions of the CARES Act, so it’s certainly worth exploring if you’ve lost your income!
Now, one underlying problem with this forbearance program stems from both urgency and sheer quantity of people affected. Many have criticized the provisions of the mortgage forbearance program for being too easy for borrowers to access, worried that people who don’t actually need the relief will try to take advantage.
It’s important to remember, however, that even if it’s easy to qualify for mortgage payment forbearance under the CARES Act, more documentation and proof of need will be required once repayment plans need to be established. The payments owed aren’t going away, they are just being temporarily deferred, and divided among other payments in the future. While there may still be some who try to take advantage, it will likely only cause problems for them in the long run. This public concern is worth mentioning as a reminder to those not facing financial hardship. The forbearance program isn’t an easy out, but rather a critical government protection to help those who need it most. Please carefully consider your needs before applying. For those who do truly need relief from making monthly mortgage payments, this provision of the CARES Act can make a huge difference during these unforeseen difficulties. If you’ve lost your job, closed your business, or had to stop contract work, it’s going to be extremely challenging to keep up with payments on your home loan. Explore your options and get the help you need!