Melissa A. Youngman
CARES Act, Part Three: How is my Mortgage Affected?
In Part Three, we discuss the mortgage forbearance provisions in the CARES Act, and how those provisions may affect individuals in bankruptcy. Section 4022 of the CARES Act provides foreclosure relief for "federally-backed loans" (which typically means Fannie Mae, Freddie Mac, FHA, VA, or USDA mortgages.)
To determine if your mortgage is a Fannie Mae loan, use the below link:
To determine if your mortgage is a Freddie Mac loan, use the below link:
To determine if your loan is an FHA loan, call HUD at (877) 622-8525.
MORATORIUM ON FORECLOSURE ACTIVITY. Under the CARES Act, mortgage servicers for federally-backed loans may not commence foreclosure, pursue a foreclosure judgment, set a foreclosure sale, or take any steps to execute a foreclosure-related eviction for the 60 days following March 18, 2020. Mortgage borrowers do not have to show that they have suffered a financial hardship due to COVID-19 to qualify for this relief.
FORBEARANCE RELIEF AVAILABLE UPON REQUEST. Under the CARES Act, homeowners affected by COVID-19 with federally-backed mortgage loans are entitled to receive forbearance from mortgage payments for up to 180 days, and then request and obtain additional forbearance for up to another 180 days. Borrowers must request the relief and indicate that they cannot make their regular mortgage payments due to COVID-19. During the forbearance period, no fees, penalties, or interest shall accrue on the borrower’s account beyond the amounts scheduled or calculated as if the borrower made all contractual payments on time and in full under the terms of the mortgage contract. The covered period appears to be during the emergency or until December 31, 2020, whichever is earlier. Before agreeing to a forbearance, borrowers should request clear repayment terms from their mortgage servicer. Otherwise, there is a risk that the entire amount will be due immediately after the forbearance period ends, which would be impossible for most borrowers to comply with. In addition, entering into a forbearance could negatively impact borrowers with mortgage loans escrowed for taxes and insurance, resulting in higher monthly mortgage payments in the future.
FORBEARANCE FOR BORROWERS IN BANKRUPTCY. If you have a pending chapter 13 bankruptcy case, you should consult your bankruptcy attorney about what needs to be done in your bankruptcy case to protect you in light of the forbearance. At the very least, the Court and your creditors should be notified. Your attorney can advise you as to what type of motion or notice should be filed to best protect your interests.
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This article is meant for informational purposes only. It does not constitute legal advice and the reading of it does not create an attorney-client relationship between the author and the reader. All readers are encouraged to speak to a licensed bankruptcy attorney in the state they reside in for legal advice specific to his/her unique circumstances.