The Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed by Congress last month. This allows struggling Americans to put off their home loan payments for up to a year. But while creating temporary relief options, the CARES Act is specific only to certain mortgages and is lacking in specificity as to how the missed payments are to be repaid.
The CARES Act gives homeowners with federally backed loans two types of relief. First, it prevents lenders from beginning foreclosure proceedings on federally backed loans for at least 60 days after March 18.
Second, homeowners who are experiencing financial hardship from the coronavirus pandemic can request a forbearance for up to 180 days, which may be extended for an additional period of up to 180 days if the homeowner is still under financial duress.
So, if your mortgage is federally backed and your income has been affected by the coronavirus, you have a right to a forbearance. But, as homeowners are discovering, there may be one alarming catch – having to come up with months of missed payments all at once.
Some lenders are telling homeowners they have to repay those postponed payments in a lump sum once the deferment period is up. It's a demand that can put homeowners at risk of foreclosure.
Identify who owns your mortgage. A mortgage can be owned by a bank, or a bank can service a loan backed by government-sponsored enterprises such as Fannie Mae, Freddie Mac or agencies such as the FHA.
The entities backing the home loans each have their own rules, which means anyone with a government-backed loan could be asked to make a lump sum payment after the granted forbearance period, or they could be offered other options once that time is up. If you don’t have a federally backed mortgage, some loan servicers may still have forbearance or deferment options.
Covid-19 has caused tremendous and rapid change triggering additional programs to become available as the mortgage industry continues to lobby the federal government. If you have questions or concerns, our attorneys are available to help you navigate through these coronavirus induced challenging times:
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