For all those that are paying attention to how our local state agencies and government legislatures are responding to the COVID-19 situation, you may have heard of the CARES Act. The Act has now been put to paper by statute and there are some components everyone should definitely be aware of. We encourage our readers to do more independent research before acting and continue to pay your mortgage if you have the ability while you figure out what your best solution is.
Forbearance is when your mortgage service or lender allows you to pause or reduce your mortgage payments for a limited period but does not ease what you’ll have to repay on any missed or reduced payments.
Your relief options under the CARES act depends on who is backing the mortgage. To be eligible under the CARES Act the mortgage must be federally owned or otherwise backed by a federal agency. There is a list provided in the attachment. Under the CARES Act there are two types of relief options:
First, the lender or loan servicer may not foreclose on the mortgage for 60 days after March 18, 2020. Specifically, the CARES Act prohibits lenders and servicers from beginning a judicial or non-judicial foreclosure or from finalizing a foreclosure judgment or sale during this period.
Second, if your client has experienced financial hardship due to the coronavirus pandemic, they have a right to request a forbearance for up to 180 days. They have the right to request one extension for another up to 180 days. They must contact the loan servicer to request this forbearance. No additional fees, penalties, or interest will be added to their account. No additional documentation to qualify other than they claim to have a pandemic-related financial hardship.
If your mortgage is not backed by any of the agencies listed on the Consumer Financial Protection Bureau (CFPB) website, you will need to call your provider and see if there is any additional relief. You also need to be aware of how the CARES Act affects all renters in case they cannot make rent. The CFPB has also provided a Guide to Coronavirus Mortgage Relief Options on their website as well as other great resources to help protect consumer’s finances from the coronavirus.
Now, if your mortgage is backed by a federally backed mortgage (or any of the lenders listed on the CFPB website, the CARES Act provides for a suspension or moratorium on evictions. If you have a federally backed mortgage, you cannot evict the tenant for nonpayment of rent for 120 days beginning on March 27, 2020, the effective date of the CARES Act. After a 120 day period, they still cannot evict without a thirty-day notice from the tenant.
Before applying for any one of the programs and your mortgage is covered by the CARES Act, you need to be aware of the state rules regarding suspended eviction and foreclosures due to the pandemic.