CARES Act Mortgage Forbearance: FAQs And Updates
Kevin Graham7-minute read
October 27, 2023
COVID-19 has had a profoundly negative effect on the economy and the livelihoods of many Americans. From temporary job shutdowns and permanent layoffs to missing work because you got sick or had to care for someone with the virus, there is no doubt that many of us are facing a new financial reality.
Fortunately, as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, Congress provided funding and guidance for several measures intended to offer financial and other assistance during this challenging time. In this article, we'll be going over the CARES Act mortgage provisions and what you need to know. But first, let's get back to basics.
What Is The CARES Act?
The CARES Act was passed in late March 2020. It provided funding for economic relief related to temporary shutdowns and job losses. Among other measures, the economic provisions of the act led to the Paycheck Protection Program, expanded unemployment assistance and provided some emergency loan funding. Another widely reported provision of the act was the temporary pause on federal student loan payments.
Funding was also provided for various health care initiatives, such as a rapid vaccine development program, the support of health care workers and money and guidance to address a shortage of personal protective equipment (PPE) and other crucial items needed to deal with COVID-19 and similar situations.
A section of the act called for lenders to provide mortgage forbearance relief. Although many pandemic-related laws expired with the declaration of the end of the national emergency in April 2023 – including the mortgage forbearance provisions – some homeowners are still finishing their COVID-19 hardship forbearances. Let's take a look at this mortgage assistance and how it worked.
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How Mortgage Forbearance Works
Mortgage forbearance temporarily pauses or reduces mortgage payments, providing relief to homeowners who are struggling financially for whatever reason. It’s a short-term solution. And by the end of the forbearance period, homeowners must catch up on their missed or reduced payments.
Mortgage Forbearance And The CARES Act
As part of the CARES Act, Congress gave homeowners impacted by COVID-19 the option to request up to a year of mortgage payment forbearance. Rocket Mortgage® approved initial forbearances for 3 months, with a client option to extend forbearance every 3 months for up to a year. Depending on a client’s circumstances, they might have qualified for additional months of forbearance beyond what the CARES Act provided.
How Could You Get Mortgage Forbearance Under The CARES Act?
To request a COVID-19 forbearance under the CARES Act, you had to tell your mortgage servicer – the entity you make your monthly mortgage payment to – that you suffered a financial hardship caused directly or indirectly by the virus. Servicers also manage and administer your escrow account for taxes and insurance if you have one. Rocket Mortgage continued to pay homeowners’ taxes and insurance during forbearance if they had an escrow account with us.
It's important to note that payments paused during forbearance aren't forgiven and must be repaid. Depending on their forbearance period or extensions, some homeowners may still be finishing up their COVID-19 forbearance. When you're ready to exit your forbearance or when it ends, check in with your mortgage servicer for guidance on the next steps.
When Does Mortgage Forbearance Under The CARES Act End?
Rocket Mortgage clients still on COVID-19 forbearances may finish out the remainder of their time on the plan without any negative credit impact. However, the amount of time you have left in forbearance depends on your lender’s policies and how long you've been in forbearance.
If you want to refinance or purchase soon after, requesting forbearance can impact your ability to qualify. In this case, it would be best to continue making payments if you can afford it.
How Does COVID-19 Mortgage Forbearance Repayment Work?
Once your forbearance is over, you must repay those missed payments. Your mortgage servicer will work with you to determine which programs are available to help you get back on track. Here are some program options:
- Deferral or partial claim: Part or all of your past-due balance will be set aside to pay off later. It'll be due when you pay off your mortgage, sell your home or refinance. You won't be charged any additional interest on the deferred balance.
- Repayment plan: Your past-due balance will be added to your regular monthly mortgage payments for a specified amount of time, typically 3 – 6 months, until your loan is current.
- Loan modification: The terms of your existing loan – which can include your rate, term or principal balance – will be updated to include the past-due payments.
- Reinstate: If you can afford it, you can pay back the entire deferred amount all at once.
If you have any questions, make sure you're communicating with your servicer.
Mortgage Forbearance Deadlines Under The CARES Act
If you requested mortgage forbearance under the CARES Act, it could have lasted up to a year. If your COVID-19 forbearance is ongoing, contact your servicer about your end date and your options. Rocket Mortgage clients can also check online.
CARES Act FAQs
Now that we've gone over the basics, it's time to answer several frequently asked questions about mortgage forbearances under the CARES Act.
What types of loans are covered under the CARES Act?
Under the CARES Act, homeowners with federally backed mortgages could take advantage of mortgage forbearance relief due to financial hardship caused by COVID-19. This includes loans guaranteed by the Federal Housing Administration (FHA), U.S. Department of Agriculture (USDA) and Department of Veterans Affairs (VA), among others. Because Fannie Mae and Freddie Mac are government-sponsored enterprises, conventional loans made by these institutions are also covered.
How do borrowers qualify for CARES mortgage forbearance?
Because the national emergency declared in response to COVID-19 ended in April 2023, homeowners can no longer qualify for a COVID-19 forbearance beyond that end date – although the exact time frame will depend on their investor. Rocket Mortgage clients in a COVID-19 forbearance may finish up their forbearance period and work with us to qualify for a repayment option.
Are there fees or penalties that accompany a CARES forbearance request?
The provisions of the act were specifically written to prevent the charging of fees and penalties related to a COVID-19 forbearance. During forbearance, servicers aren't allowed to charge extra interest beyond what you would have typically paid for your monthly mortgage payments.
What happens if your CARES forbearance plan extension is about to expire?
If your forbearance is about to expire, contact your servicer to discuss potential repayment options. If restarting your monthly mortgage payments is unrealistic for you, your servicer can look into other options, but these options would likely impact your credit.
Can you exit your CARES forbearance plan early?
You have the option of exiting your forbearance period and asking your servicer to qualify you for a repayment option at any point.
How will forbearance impact my credit?
During a COVID-19 forbearance, Rocket Mortgage won't report paused or reduced payments as late payments to the credit bureaus.
The Bottom Line
The CARES Act was designed to provide relief in many areas, including the forbearance of mortgage payments for homeowners experiencing financial difficulties caused by COVID-19. A forbearance is a temporary pause in mortgage payments. After a forbearance, clients may qualify for repayment programs, including deferral, a repayment plan or a loan modification, among other options.
Under the law, homeowners with federally backed mortgages could qualify for a forbearance if they were financially impacted by the pandemic. No fees, penalties or excess interest could be charged on paused or reduced payments.
Mortgage payments that aren’t made during a COVID-19 forbearance aren’t reported as late to the credit bureaus. But depending on the type of loan you want to apply for in the future, you may be required to bring your loan current or make a certain number of payments before you can apply for a new loan.
Consult with your mortgage servicer and a financial advisor before making any decisions regarding forbearance. It could affect your ability to refinance or purchase down the line.
To see what your current mortgage options may be, apply online at Rocket Mortgage.
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