Consumer Relief Guide – Your Rights to Mortgage Payment Forbearance and Foreclosure Protection Under the Federal CARES Act (Updated December 2020)
This guide was originally issued in May 2020 as a joint effort of the Conference of State Bank Supervisors (CSBS), the organization representing state financial regulators, and the Consumer Financial Protection Bureau (CFPB). This update by state financial regulators is issued only by CSBS.
The COVID-19 pandemic continues to cause financial hardship for millions of American homeowners. If you, or someone you know, is experiencing financial hardship, you or they may have access to help under the federal law known as the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). This guide contains information to help you make important decisions about your financial obligations.
Why Update This Guide?
This update pertains to the period of time in which borrowers have a right to request an initial forbearance or extension of an existing forbearance. Section 4022 of the CARES Act established the requirements for consumers requesting, and mortgage servicers providing, forbearance from monthly mortgage payments on federally backed mortgage loans as described below. However, Congress did not specify the “covered period” for forbearance, leaving consumers, industry and even regulators uncertain as to when the benefit should expire. This uncertainty led many to interpret that a borrower’s right to request forbearance automatically expired Dec. 31, 2020.
New guidance by federal housing agencies clarifies the expiration dates for which borrowers can request initial forbearance to at least Feb. 28, 2021.
Clarification of Forbearance Covered Period
On Monday, Dec. 21, 2020, certain federal housing agencies announced that the covered period for requesting an initial forbearance under the CARES Act as it applies to their programs is available through at least Feb. 28, 2021, as follows:
- Federal Housing Administration (FHA) Loans: Interpretation of covered period to extend to Feb. 28, 2021 by Mortgage Letter 2020-44 issued December 21, 2020 and dated December 17, 2020, available HERE.
- U.S. Department of Veterans Affairs (VA) Loans: No extension necessary – existing guidance in circular 26-20-12 dated April 8, 2020 is not rescinded until April 1, 2021 and is available HERE.
- U.S. Department of Agriculture (USDA) Loans: Interpretation of covered period to extend to Feb. 28, 2021 by bulletin dated December 21, 2020 available HERE.
- Fannie Mae and Freddie Mac Loans: No end date currently identified, however, Fannie Mae Lender Letter 2020-02, issued March 18, 2020 and updated periodically, and Freddie Mac Bulletin 2020-10, issued April 8, 2020, provided notice to mortgage servicers that they are to comply with forbearance requests made under the CARES Act. No expiration of this requirement has been announced at this time.
It is important to note that any covered period discussed above applies only to a borrower’s request of an initial or extended forbearance. The number of days borrowers have the right to forbear payments in an initial request or extension request is not altered, provided a request is not made any later than the end of the covered period (Feb. 28, 2021 for FHA, VA and USDA loans. Unspecified for Fannie Mae and Freddie Mac loans).
Example: When a borrower makes a request for a new forbearance before the end of the covered period the borrower has the right to forbear for 180 days despite the expiration of the covered period. However, any extension request of an initial forbearance must also occur prior to the expiration of the covered period. If such an extension is made prior to the expiration of the covered period, the borrower has the right to forbear for an additional 180 days despite the expiration of the covered period.
Note: For all above referenced federally backed mortgage loan programs you should check with your servicer directly about the covered period for making new forbearance or extension of forbearance requests.
You have the right to obtain a 180 day pause in paying your mortgage or temporarily lower mortgage payments if you are a borrower on a federally backed mortgage loan and affirm that you are experiencing a financial hardship due directly or indirectly to the COVID-19 emergency. This program is called mortgage forbearance or mortgage relief. Your mortgage servicer (the company you send your payments to each month) can tell you if your loan is federally backed.
The decision to request forbearance should be considered carefully; however, Congress has made the actual request process very easy. See The Decision to Request Forbearance below.
Forbearance is a temporary reduction or suspension of your monthly payment to help you through a difficult period. You will need to repay any missed or reduced payments in the future through one of numerous options. While in forbearance, you can still choose to make partial payments, which will reduce the amount you would need to repay in the future.
At the end of the forbearance period you and your servicer will discuss repayment options. In most cases you should receive multiple options to repay the monthly payments that were not paid during forbearance over time.
There are no fees associated with obtaining forbearance. Be wary of anyone offering to help you with forbearance for a fee.
Foreclosure actions on loans federally backed by Fannie Mae, Freddie Mac and HUD, which includes single family FHA loans and reverse mortgage HECM loans, were initially frozen by the CARES Act until June 30, 2020. Extensions for suspension of foreclosure actions have been provided as follows:
- Fannie Mae: Lender Letter 2020-02, updated December 9, 2020, extended the suspension of foreclosure-related activities through January 31, 2021 available HERE.
- Freddie Mac: Bulletin 2020-46, issued December 9, 2020, extended the suspension of all foreclosure actions through January 31, 2021 available HERE.
- FHA: Mortgagee Letter 2020-43, released December 21, 2020 and dated December 17, 2020, extended the existing foreclosure and eviction moratorium through February 28, 2021 available HERE.
- VA: Circular 26-20-30, issued August 24, 2020, extended the existing foreclosure moratorium through December 31, 2020 available HERE.
- USDA: on December 21, 2020 announced an extension of its existing foreclosure and eviction moratorium through February 28, 2021 for all Single Family Housing direct and guaranteed home loans available HERE.
Steps to request forbearance under the CARES Act
First, you will need to contact your mortgage servicer.
If you don’t know if you have a federally backed mortgage, call your mortgage servicer. You can find your servicer on your monthly mortgage statement or by searching the Mortgage Electronic Registration Systems (MERS) website: mers-servicerid.org/sis.
Eligible Loan Types
To be eligible for protections under the CARES Act, your mortgage must be backed by one of the federal agencies and entities listed below.
Loan types that are federally backed include:
- Conventional loans purchased or securitized by Fannie Mae and Freddie Mac (combined, GSEs) To find out if your loan is owned by one of the GSEs, please visit the following webpages:
- Federal Housing Administration (FHA), including Home Equity Conversion Mortgage (HECM)
- U.S. Department of Veterans Affairs (VA)
- U.S. Department of Agriculture (USDA), including USDA Direct and USDA Guaranteed
Privately held loans are not eligible for forbearance relief under the CARES Act, but you should still contact your mortgage servicer to ask about assistance programs.
Terms of the Forbearance Program
The next step is to tell your servicer that you are experiencing financial hardship due to the COVID-19 emergency and are requesting a forbearance. Check the company website for an online form or phone number.
The CARES Act grants you the right to forbearance by submitting a request to your mortgage servicer for forbearance due to financial hardship during the COVID-19 emergency.
You are not required to submit documentation to prove your financial hardship to enter a forbearance under the CARES Act. And you are eligible regardless of delinquency status, so it does not matter if you are delinquent at the time of application or were delinquent before the President’s March 13, 2020, emergency declaration.
Under the new law, forbearance shall be granted for up to 180 days at your request, and shall be extended for an additional 180 days at your request.1 Remember to make the second 180-day request before the end of the first forbearance period. Most servicers are required under federal regulations to notify you about applying for other mortgage relief options.
You will not accrue fees, penalties, or interest beyond the amounts already scheduled or calculated based on the terms of your mortgage. However, you will have to pay the payments that were missed during forbearance, including taxes and insurance, back to the mortgage company in the future and after the forbearance period ends. At the end of your forbearance period, you and your servicer will determine how you will repay any missed payments or deficiencies related to reduced payments, especially in your escrow account. In most cases, you will be given multiple options for repaying the forbearance; a lump-sum repayment will typically not be the only option. Some options may include:
- Establishing a repayment plan that would spread your missed payments over a specified number of months, which would increase your monthly payment until the missed forbearance payments were fully repaid and would be based on your ability to make the new monthly payments.
- Extending the term of the loan for some amount of time to pay back the missed payments. For example, if provided a six-month period where you don’t make a mortgage payment, your mortgage servicer could add six months of payments on to the date when the loan is scheduled to be paid off (the maturity date). This would be one form of a loan modification.
- Modifying your loan to catch up the missed payments over time through a specified modification program offered by the owner of your loan.
Note: Any loan modification after your forbearance term will likely require your servicer to document your income and expenses to ensure you qualify for a modification program. The servicer will contact you about this prior to the end of your forbearance period.
You should arrange a forbearance that works for you. To prepare to call your mortgage servicer for a forbearance request, you will want to gather your account information. You can review publicly available mortgage servicer call scripts so that you will know the types of questions your servicer may ask when discussing forbearance with you. Commonly used call scripts and resource documents include:
- Fannie Mae Forbearance Call Script: LINK
- Freddie Mac COVID-19 Call Script: LINK
- FHA COVID-19 Questions and Answers: LINK
- VA Circular 26-20-12: LINK
The Decision to Request Forbearance
If your loan is eligible for relief and you are having financial hardship due to COVID-19, you are entitled to lower payments or forbearance that is provided in the CARES Act. If you are still able to make your full monthly payment, you may wish to keep doing so because interest continues to grow as scheduled and you will eventually have to repay the amount of any forbearance.
When discussing forbearance with your mortgage servicer, be sure to discuss all repayment options available to you before entering a forbearance program. Repayment options may differ depending on your loan type, and you should know before entering forbearance how you will be expected to repay your paused payments.
If you and your servicer disagree on forbearance relief options, please remember that the CARES Act entitles you to a forbearance of up to 180 days at your request, and an extension of an additional 180 days at your request. Keep detailed notes on your conversations and check any documentation sent by your servicer to make sure the terms of your forbearance are clear.
Forbearance Attestations on Newly Closed Mortgage Loans
Mortgage lenders are currently requiring new borrowers to sign COVID Attestations at closing confirming that income has not changed and that they are not aware of future changes in employment or the need to request forbearance. Lenders may also inform you that your loan is not immediately federally backed and therefore does not qualify for CARES Act forbearance.
These attestations do not limit your rights under the CARES Act as described above. However, it may be true that your loan is not immediately federally backed and therefore will not qualify under the CARES Act until it becomes federally backed, which can take days or in some cases weeks.
This does not mean that you cannot request forbearance information and many lenders and servicers are providing forbearance benefits regardless of federally backed status. If you have recently closed on a loan and already find yourself in need of assistance, you should contact your servicer to determine your options.
Credit Protection During COVID-19
The CARES Act also protects you from some negative information on your credit report because of any mortgage relief or assistance related to the COVID-19 emergency. During the period covered by the CARES Act, your mortgage servicer is required to report your account as current if your account was current at the time of the forbearance and if you meet the terms of your mortgage relief; or if your account was delinquent before the COVID-19 emergency, to report the same delinquent status. If you bring your account current during the forbearance, your mortgage servicer must report the loan as current.
Additional Resources on CARES Act Forbearance
If you need help working with your mortgage servicer or understanding your options, you may want to reach out to a non-profit housing or credit counseling agency, or other professional to help you with your specific situation. Contact information for filing a complaint with and requesting assistance from the CFPB or your state regulator is included below.
Mortgage regulators at both the state and federal level have websites with information about what governments are doing to protect consumers during this national emergency. These websites include:
- Unified Agency Website: www.cfpb.gov/housing
- CFPB COVID-19 Mortgage and Housing Assistance Page: LINK
- CSBS COVID-19 Consumer Resources Page: LINK
- American Association of Residential Mortgage Regulators (AARMR): LINK
Relevant statutory provisions appear mainly in Sections 4021 and 4022 of the CARES Act, the full text of which is available HERE.
If you need to file a complaint related to your loan, contact your state financial regulator or the CFPB.
- Find your state mortgage regulator on the CSBS website HERE.
- CFPB Complaint Portal can be accessed HERE.