The COVID-19 pandemic brought unprecedented financial challenges to homeowners across the nation. Recognizing this widespread hardship, the federal government enacted the CARES Act, which included crucial provisions for mortgage relief. If you’re a homeowner struggling to make payments, understanding the Cares Act Mortgage Relief Program is essential. This guide breaks down the key aspects of this program and how it can help you navigate financial difficulties.
Understanding the CARES Act Mortgage Relief Program
The Coronavirus Aid, Relief, and Economic Security (CARES) Act, passed in 2020, offered significant protections for homeowners with federally backed mortgages. The primary goal of the CARES Act Mortgage Relief Program was to provide a safety net, preventing foreclosures and easing financial burdens during the pandemic. This relief came in several forms, primarily focused on forbearance and foreclosure moratoriums.
Who Qualifies for CARES Act Mortgage Relief?
Eligibility for the CARES Act Mortgage Relief Program largely depended on whether your mortgage was federally backed. This includes mortgages owned or guaranteed by:
- Fannie Mae: To check if Fannie Mae owns your loan, use their loan lookup tool.
- Freddie Mac: Verify if Freddie Mac owns your loan through their loan lookup tool.
- Federal Housing Administration (FHA): Contact your mortgage servicer to determine if your loan is FHA-insured.
- U.S. Department of Veterans Affairs (VA): VA-backed loans also fall under federal backing.
- U.S. Department of Agriculture (USDA): USDA loans are also included.
If your mortgage was backed by one of these entities, you were likely eligible for relief under the CARES Act.
Key Protections Under the CARES Act Mortgage Relief Program
The CARES Act provided several critical protections for eligible homeowners:
Mortgage Forbearance
One of the most significant aspects of the CARES Act Mortgage Relief Program was mortgage forbearance. This allowed homeowners facing COVID-19 related financial hardship to temporarily pause or reduce their mortgage payments.
- Duration: The CARES Act mandated servicers to grant up to 180 days of forbearance, with the option to extend for another 180 days, totaling up to 360 days of potential relief.
- Fees and Penalties: Importantly, servicers were prohibited from charging additional fees, penalties, or interest on the paused payments beyond what was originally scheduled.
- Eligibility: To obtain forbearance, homeowners needed to attest to financial hardship due to COVID-19.
Foreclosure Moratorium
To further protect homeowners, the CARES Act implemented a foreclosure moratorium on federally backed mortgages.
- Suspension of Foreclosures: This provision temporarily halted foreclosure proceedings, foreclosure-related evictions, and foreclosure sales.
- Extended Protection: The foreclosure moratorium for federally backed mortgages was extended multiple times, offering prolonged security for struggling homeowners. While the initial periods have expired, understanding this protection is crucial for historical context and potential future programs.
Credit Protection During Forbearance
The CARES Act also included measures to safeguard homeowners’ credit scores during forbearance.
- Reporting Requirements: Mortgage servicers who agreed to forbearance or modified payment plans due to COVID-19 were required to report the loan as “current” to credit reporting agencies.
- Maintaining Credit Status: As long as homeowners fulfilled the terms of their forbearance agreement, their credit status was to be maintained as current, preventing negative impacts on their credit scores due to pandemic-related financial difficulties.
Additional Relief for Fannie Mae and Freddie Mac Mortgages
For mortgages specifically backed by Fannie Mae or Freddie Mac, additional relief measures were available:
- No Late Fees: Homeowners in forbearance would not incur late payment fees.
- No Credit Reporting of Delinquencies: Forbearance would not result in delinquencies being reported to credit bureaus.
- Suspension of Legal Proceedings: Foreclosure and other legal actions were suspended during the forbearance period.
- Payment Options: Fannie Mae and Freddie Mac offered flexibility in repayment, including the option to place missed payments at the end of the loan term.
FHA Loan Specific Relief: COVID-19 National Emergency Partial Claim
For homeowners with FHA-insured mortgages, the CARES Act Mortgage Relief Program was complemented by the COVID-19 National Emergency Partial Claim.
- Partial Claim Option: This option was designed to help homeowners reinstate their loans after a period of forbearance.
- Interest-Free Subordinate Mortgage: The partial claim allowed servicers to advance funds to cover missed payments on behalf of homeowners. This advance was structured as an interest-free subordinate mortgage, which the homeowner wouldn’t have to repay until the original mortgage was paid off, refinanced, or the home was sold.
Repayment Options After Forbearance
It’s important to understand that forbearance is not loan forgiveness. Homeowners are still responsible for the deferred payments. However, the CARES Act Mortgage Relief Program and subsequent guidance ensured that homeowners were not required to repay the forborne amount in a lump sum at the end of the forbearance period. Common repayment options included:
- Reinstatement: Paying the total amount of missed payments at once.
- Repayment Plan: Spreading the missed payments over a period of time in addition to regular mortgage payments.
- Loan Modification: Permanently changing the loan terms to make payments more affordable.
- Payment Deferral: Placing the missed payments at the end of the loan term, repayable when the home is sold or refinanced.
State-Level Assistance: Connecticut Programs
Beyond federal programs, states like Connecticut offered additional mortgage assistance.
- MyHomeCT: Administered by the Connecticut Housing Finance Authority (CHFA), MyHomeCT provided grants to Connecticut homeowners experiencing COVID-19 related financial hardship. This program could help with mortgage payments and other housing costs.
- Emergency Mortgage Assistance Program (EMAP): Also offered by CHFA, EMAP provided further support to homeowners facing financial difficulties. More information is available on the CHFA website.
Navigating Mortgage Relief
If you are experiencing mortgage difficulties, even after the peak of the pandemic, it’s crucial to take proactive steps:
- Contact Your Servicer: Reach out to your mortgage servicer immediately to discuss your situation and explore available options.
- Understand Your Loan Type: Determine if your mortgage is federally backed to understand your potential eligibility for various programs.
- Explore Repayment Options: Discuss different repayment options with your servicer to find a sustainable solution.
- Seek Guidance: Utilize resources from the Consumer Financial Protection Bureau (CFPB) at https://www.consumerfinance.gov/coronavirus/mortgage-and-housing-assistance/ for further information and support.
Conclusion
The CARES Act Mortgage Relief Program provided vital assistance to homeowners facing financial hardship during the COVID-19 pandemic. While some of the specific protections like foreclosure moratoriums have evolved, understanding the principles of forbearance and the resources available remains important. If you are struggling with your mortgage, remember to communicate with your servicer and explore all available avenues for relief.
References:
- CARES Act Mortgage Forbearance: What You Need to Know – Consumer Financial Protection Bureau
- 5 Steps to Ask for Mortgage Forebearance – Consumer Financial Protection Bureau
- COVID-19 Resources for Homeowners – U.S. Dept. of Housing and Urban Development
- MyHomeCT Program – Connecticut Housing Finance Authority
- Emergency Mortgage Assistance Program (EMAP) – Connecticut Housing Finance Authority
- Consumer Financial Protection Bureau (CFPB) website
