If you’re a homeowner, your monthly mortgage payment is likely your most expensive bill, and if your income stream has been interrupted due to COVID-19, it may be impossible to foot the bill. As a way to provide some peace of mind to struggling homeowners, the federal government has enacted a temporary assistance program, helping keep homeowner’s in their home.
The CARES Act
When widespread shutdowns and layoffs began earlier this year, lawmakers agreed to pass a massive $2.2 trillion relief package, known as the Coronavirus Aid, Relief, and Economic Security (CARES) Act. President Trump signed the bill into law on March 27, 2020.
Along with a round of $1,200 stimulus checks for millions of Americans, the bill also outlined protections for homeowners with federal or government sponsored mortgage loans backed by FHA, VA, USDA, Freddie Mae, Fannie Mac.
What Protections Does The CARES Act Offer Homeowners?
According to the Consumer Financial Protection Bureau, a moratorium was put into place for many federally or government sponsored loans, barring lenders from foreclosing on homeowners who default on their loans. The moratorium is in place until December 31, 2020, unless an extension is put into place. Also, lenders are prohibited from beginning the foreclosure process, finalizing a foreclosure judgement, or carrying out a sale during this public health emergency.
Second, if the coronavirus has left you burdened financially, you are eligible to request and obtain a forbearance on your mortgage for 180 days. If you’re still in a bind after the first six months, you have the right to request an additional 180 days after that. The process is fairly simple, just reach out to your mortgage lender and make a request. You won’t be faced with any fees or penalties and your credit score won’t take a hit, though lenders may be able to see that you requested a forbearance. When it comes to interest, it will still accrue.
According to Money.com, more than four million households have entered into mortgage forbearance programs. To put that in perspective, that’s 1 out of every 10 homeowners in the United States.
What To Do After Receiving Mortgage Forbearance
Be forewarned, just because you’re unable to make your payment now doesn’t mean you’re completely off the hook. Not to be confused with forgiveness, forbearance means the loans are only on hold. That means you’ll eventually have to pay back those missed payments.
You’ll want to continue making payments on your property taxes and homeowner’s insurance, unless you’re able to work out alternative payment options.
When your forbearance period ends, you likely won’t have to pony up everything you owe all at once. You may be given a payment reduction option, where future payments will be spread out over 12 months or added to your mortgage payment once the reduction period is over.
Lastly, it’s suggested that if you have any money to spare after paying essential bills, that you set it aside for future mortgage payments. As soon as you’re able to pay your mortgage payments again, even if it’s before your forbearance ends, it’s highly recommended that you begin making those payments again.