The COVID-19 pandemic has left millions of Americans unemployed, and many more have seen lost wages and reduced working hours as well. The financial losses have many households worried about how they'll pay the bills—particularly their mortgages.
Fortunately, the Coronavirus Aid, Relief, and Security Act (the CARES Act) offers homeowners some options.
Mortgage Relief Under the CARES Act
Under the CARES Act, homeowners with government-backed mortgage loans can request forbearance if the COVID-19 pandemic has caused financial hardship. Forbearance allows these borrowers to pause monthly payments while they get back on their feet. Some mortgages may have a deadline of requesting an initial forbearance of Dec. 31, 2020.
Under the CARES Act, you may be able to take advantage of the following:
- Up to 360 days of forbearance
- No fees or additional interest charged, beyond the regularly scheduled interest and fees
- No documentation of hardship required
- No foreclosures or foreclosure-related evictions until after December 31
- Deferred payments cannot be reported to credit bureaus as late or delinquent
What Loans Qualify for Forbearance Under the CARES Act?
Any federally backed mortgage loan can qualify for forbearance under the CARES Act. This includes:
- Loans owned by Fannie Mae or Freddie Mac
- FHA loans, including Home Equity Conversion Mortgages (reverse mortgages)
- VA loans
- USDA loans
- Native Hawaiian Housing loans
- HUD-guaranteed Indian Home loans
If you’re not sure if your loan falls into one of these categories, the Consumer Financial Protection Bureau (CFPB) has some loan tools that can help.
How to Request Mortgage Forbearance During COVID-19
Any borrower who has experienced financial distress due to the COVID-19 pandemic—either directly or indirectly—can request forbearance under the CARES Act.
If you’re interested in a forbearance plan, you’ll need to call your loan servicer. With some lenders, you may be able to request your payment forbearance online (as of November 2020, Bank of America offers this, for example).
You won’t have to submit any kind of proof that you’re experiencing financial hardship, but you will be asked details about your financial situation. You should have your account number and other mortgage and personal details on hand when you call.
Don’t know who your loan servicer is? It’s the company you actually send your payments to. Just check your monthly mortgage statement for their contact info. If you’re still not sure who to get in touch with, a HUD approved housing counselor may be able to help.
What Happens to Paused Payments?
Once your forbearance period expires, there are a few options for making up those missed payments:
- Pay the missed payments back in full
- Get on a repayment plan, and spread the payments out over time
- Add the payments on to the end of your loan term
- Modify the terms of your loan
Your servicer will get in touch with you around 30 days prior to your forbearance’s expiration date to discuss your repayment plans.
Make sure you’re absolutely clear on what your forbearance plan requires in regard to repayment. You’ll need to budget well ahead of time to ensure you can meet your obligations.
Does Forbearance Under COVID-19 Affect Your Credit Score?
If you were up to date on your payments when you entered forbearance, then your servicer will continue reporting your loan as current to credit bureaus. That means it will not have an adverse effect on your score.
In the event you were already late on your mortgage payments, the servicer can continue to report your overdue status to the credit bureaus for the entirety of your forbearance period or until you bring your account current.
Mortgage Help If You Don’t Have a Federally-Backed Loan
If you don’t have a federally-backed home loan, you may still have options. You’ll need to contact your loan servicer to find out exactly what these are, but some of the mortgage relief options you may be eligible for include:
- Forbearance, similar to that offered under the CARES Act
- Repayment plans, which let you spread out your payments over time
- Refinancing, which could help you lower your monthly payments
- A loan modification, to change the terms of your mortgage
- Selling your home via a short sale or deed in lieu of foreclosure
Some states are also offering mortgage relief, so this may be an option, too, if your loan isn’t federally-backed. Check with your state housing department to see what options might be available.
- If you have an FHA, Fannie Mae, Freddie Mac, or another type of federally-backed mortgage, you can request forbearance for up to 360 days.
- Forbearance lets you pause your payments and pay them back at a later date.
- As long as your loan was current when entering forbearance, pausing your payments won’t hurt your credit score.
- If your loan is not federally-backed, you must contact your loan servicer to discuss relief options.