More than 4 million mortgages are in forbearance. What are your housing protections?

July 2, 2020, 6:30 PM UTC

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The CARES Act passed by Congress set aside protections for what they assumed would be millions of jobless homeowners and renters.

And their projections were right: As of June 21, there are already 4.2 million mortgages in forbearance, or 8.5% of all mortgages, according to the Mortgage Bankers Association’s Monday report.

The CARES Act provides two main protections to mortgage borrowers. First, lenders and loan services cannot foreclose on borrowers with federally-backed mortgages between March 18 to August, 31. Second, federally-backed mortgage borrowers, including those with Fannie Mae or Freddie Mac loans, have the right to obtain an additional 180 days of forbearance if they’ve experienced hardship due to the pandemic.

The August 31 resumption of foreclosures is fast approaching. And as weekly unemployment claims continue to top 1 million, more Americans are turning to forbearance.

Here’s what they need to know.

What is mortgage forbearance?

During forbearance your monthly payments are suspended or reduced as a result of your financial limitations to repayment. The maximum period of forbearance for federally-backed mortgages was 180 days prior to the additional 180 days provided by the CARES Act. So combined, you have up to a year of forbearance available.

Do suspended mortgage payments during forbearance have to be repaid?

You will have to repay your missed mortgages payments during forbearance. But you aren’t required to pay it all at once. Instead, your lender can offer you a repayment plan, a modified loan structure, or you may simply have to resume your normal payments—with an extended payment period. Your loan servicer will contact you around 30 days before your forbearance ends to help determine next steps. Obviously, if you can afford to pay some of your mortgage during forbearance, it will reduce the amount you owe when the period is over.

What qualifies as hardship due to the pandemic?

To qualify for CARES Act extended forbearance, mortgage borrowers must have faced hardship due to the pandemic. But as with other CARES Act provisions, you show that you’re facing direct or indirect pandemic-related financial hardship.

How do I apply for forbearance?

Borrowers with federally backed mortgages—which includes the vast majority of U.S. mortgages—should start the forbearance application process by contacting their loan servicer.

Those without federally-backed mortgages aren’t guaranteed to get the same window of forbearance, however, they can still inquire about whether it’s something their loan servicer is willing to offer. The Consumer Financial Protection Bureau has encouraged financial institutions to work with borrowers impacted by the pandemic.

Fannie Mae, Freddie Mac, FHA, USDA, and VA mortgages are all federally-backed. But to confirm if your loan is federally-backed and eligible, just contact your loan servicer.

For homeowners with mortgages covered by the CARES Act, you only need to explain that you have a pandemic-related financial hardship, directly or indirectly related to the pandemic.

There are no fees, penalties, or additional interest associated with forbearance, and it won’t impact your credit score.

What are your foreclosure protections?

Borrowers with federally backed mortgages are protected from foreclosure through August, 31. The foreclosure protection was through just the end of June, but last month it was extended to the end of August.

“To protect borrowers and renters during the pandemic we are extending the Enterprises’ foreclosure and eviction moratorium. During this national health emergency no one should worry about losing their home,” wrote Mark Calabria, director of the Federal Housing Finance Agency, in a statement last month.

Are there protections for renters?

The CARES Act protects tenants in federally subsidized or federally backed housing from being evicted for nonpayment of rent between March 27 to July 24. But that has since been extended to the end of August.

Tenants in federally subsidized or federally backed housing also can’t be charged fees or penalties that are related to nonpayment during this period.

Some states have expanded eviction protection to all residential tenants. In New York that moratorium on evictions expired in June. However, renters in New York impacted by the pandemic are protection until later into August. Once states roll back those moratoriums, it’s expected we’ll see a wave of evictions in a country—given the unemployment rate is still above 13%.

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