In late March, 2020 Congress passed the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”).
Section 4022 of the CARES Act provides that, temporarily, if your home has a federally backed mortgage loan then you may request forbearance on the loan for six months, and then again for another six months, and your mortgage company must grant the request.
This is true whether your loan is delinquent.
It is also true whether you are in bankruptcy.
If you want to request a forbearance, then you need to submit a request to your mortgage company stating that you are experiencing a financial hardship during the COVID–19 emergency.
“Forbearance” means that you do not have to make your mortgage payments during the forbearance period. It also means that no additional fees, penalties, or interest will accrue during this period.
If you have no choice, then obviously you may want to request the forbearance.
However, if you can muddle through without it, then you at least should give it a lot of thought before requesting the forbearance. This is because at the end of the forbearance period, the payments you didn’t make during the period will suddenly all be due, like a gigantic balloon payment, unless in the meantime you have reached an agreement to the contrary with your mortgage company. A forbearance is not a “deferral”. Under a deferral, your “missing” loan payments would just be put at the end of the loan. So, if you get a forbearance, then you need to quickly start trying to work out with your mortgage company what it the arrangement is going to be once the period is over. Yep, the banks still control Congress at least that much. It would have been nice if the CARES Act provided for deferrals, not forbearances, but it does not.
Federally backed mortgage means that it is insured by the FHA or under National Housing Act, or guaranteed under the Housing and Community Development Act of 1992, or guaranteed or insured by the VA, Department of Agriculture, made by the Department of Agriculture or purchased or securitized by the Federal Home Loan Mortgage Corporation or the Federal National Mortgage Association.
If you don’t know if your mortgage is Federally backed, then either just submit the request anyway to find out, or visit the Fannie Mae website https://www.knowyouroptions.com/loanlookup, or the Freddie Mac website at https://ww3.freddiemac.com/loanlookup/.
When your mortgage company receives your request, it is supposed to grant the forbearance without requiring any additional documentation other than your statement that you are having a financial hardship caused by the COVID–19 emergency.
If loan is for a multi-family residence, then the law is not quite as lenient. For example, the loan must have been current on February 1, 2020, the forbearance period is shorter, and more documentation may be required. Individual units of condos or cooperatives are not multi-family residences.
If you would like help navigating your way through the forbearance request process, then feel free to contact our office.