Mortgage Forbearance under the CARES Act

The financial distress COVID-19 has caused for many Americans is difficult to understate.  Recent estimates suggest more than 12 million Americans are out of work.  To put that in perspective, less than six million Americans were unemployed at this time in 2019.

One of Congress’s early responses was the Coronavirus Aid, Relief, and Economic Security Act (i.e., the “CARES Act”).  President Trump signed the CARES Act into law in March 2020.  The Act included measures intended to ease financial strain, including forbearance rights for many homeowners.

While the concept of government-mandated “forbearance” may sound comforting, homeowners considering forbearance should consider the accompanying costs and benefits, in addition to the eligibility requirements.

The CARES Act’s forbearance provisions do not apply to all mortgages.  Generally, if you have a federally backed mortgage, then you have forbearance rights under the CARES Act.  For example, if you have a Fannie Mae or Freddie Mac mortgage, then your lender and servicer must comply with the CARES Act’s forbearance provisions.

Forbearance is not forgiveness.  A homeowner who takes advantage of forbearance rights under the CARES Act is relieved of having to make their payments during the forbearance period.  With that said, Lenders do not waive these missed payments.  Once the forbearance period ends, the borrower will have to make up for the missed payments somehow.  Thus, forbearance is a tool for delaying payments—not avoiding them.  Keep in mind also that interest will continue to accrue on outstanding principal during forbearance.

Forbearance under the CARES Act is not automatic.  If a homeowner has an eligible mortgage, a pandemic-related financial hardship, and a desire to enter a forbearance period, the homeowner must be proactive.  Specifically, the homeowner must reach out to their servicer or lender and request forbearance.  Homeowners can request an initial forbearance period of up to 180 days.  Homeowners can extend this initial period by an additional 180 days.

Forbearance under the CARES Act likely is not the only option.  State and local laws and resources may be available as well.  One source of information is the National Consumer Law Center, which maintains a state by state list of COVID-19 relief measures on foreclosure and eviction.  Be cautious, though: online resources are a good starting point but are not always up to date.

One of the best ways to navigate and understand all options is to speak with an attorney licensed in your state.  While speaking with an attorney certainly can be expensive, the use of an Evergreen legal plan may help you gain access to competent, professional legal representation at an affordable price. 

Call us today at 844-LEGAL-16 (i.e., 844-534-2516) if you would like to learn more about the costs and benefits of Evergreen’s legal plan offerings. 

Disclaimer: The information in this blog post is provided as general information only and should not be construed as legal or other professional advice.  Evergreen Legal Protection is not a law firm.  Never substitute information obtained from the internet or this blog for professional advice and guidance from a legal professional licensed in your jurisdiction.