Help for homeowners under the CARES Act
In response to the coronavirus crisis, the government has enacted the CARES Act.
This provides some protection to mortgage borrowers suffering due to COVID–19.
The CARES Act allows these negatively affected homeowners to postpone payments using forbearance, which can pause mortgage payments for up to one year.
Here are the details about who qualifies for mortgage relief under the CARES Act, how it works, and how to request forbearance from your loan servicer if you need it.
In this article (Skip to...)
- CARES Act mortgage relief explained
- How mortgage forbearance works
- Who qualifies for CARES Act loan forbearance?
- Request mortgage relief with a hardship letter
- Hardship letter template
- Why a written forbearance request is important
- Should you request forbearance?
CARES Act mortgage relief explained
It’s important to understand what the CARES Act offers in the way of mortgage relief – and who’s eligible.
The CARES Act permits mortgage borrowers who are experiencing a COVID–19–related financial hardship to seek forbearance of their loan for a limited time (up to one year).
Forbearance means the lender agrees to suspend your mortgage payments with no threat of foreclosure on your property.
The CARES Act lets borrowers request an initial forbearance period up to 180 days. At the end of that 180 day period, they can then request to extend this period for an extra 180 days – adding up to 12 months maximum.
How mortgage forbearance works
“Forbearance doesn’t mean you don’t have to repay the postponed payments or that your debt is forgiven. It means your mortgage payments are deferred or delayed until the end of the agreed–upon forbearance period,” explains Suzanne Hollander, a real estate attorney and Florida International University senior instructor.
“Forbearance doesn’t mean ... your debt is forgiven. It means your mortgage payments are deferred or delayed until the end of the agreed–upon forbearance period.” –Suzanne Hollander, Real estate attorney
Rick Sharga, president and CEO of CJ Patrick Company, says there are three possible ways your deferred payment amounts can be paid back after the forbearance period ends:
- “It can be a lump–sum payment of all deferred amounts;
- “Or you can request an extension added to the end of the loan term equal to the number of months that payments have been deferred. For example, if no payments were made for six months, an extra six months are added to the end of your loan
- “Or you can ask your servicer to amortize the amount due over the remaining life of the loan.”
Be aware that, during the forbearance period, servicers aren’t allowed to charge fees or interest beyond what you would have had to pay if you were making your payments as scheduled.
That means there are NO late fees for the payments missed.
In addition, thanks to the CARES Act, postponed mortgage payments due to coronavirus cannot count against your credit score in any way.
Who qualifies for CARES Act loan forbearance?
Homeowners are eligible for mortgage relief under the CARES Act if they have a conventional or government–backed mortgage. That includes:
- Mortgages owned by Fannie Mae or Freddie Mac
- FHA mortgages
- VA mortgages
- USDA mortgages
If you don’t know whether you have a government loan, ask your servicer (the company you make payments to).
Note: Even if you qualify, you will NOT be automatically put under a forbearance plan. If you need to postpone your mortgage payments, you must contact your loan servicer and request it.
To qualify, you must also be suffering a financial hardship caused by the coronavirus – such as a job loss, furlough, reduced hours at work, or costly medical treatment bills.
How to request mortgage relief with a hardship letter
Normal forbearance rules require you to “prove” your financial hardship by documenting your job loss or other issues. However, the CARES Act made it easier for homeowners to get help.
To get forbearance under this plan, you only need to state that you’re going through hardship. You don’t need to prove it with documentation.
You can do this by phoning your servicer, but experts recommend writing and sending a hardship letter instead.
- Use this free online tool to generate a hardship letter that you can use to request mortgage forbearance
In your letter, you should affirm and attest that you are suffering a financial hardship caused by the COVID–19 emergency.
“I would include an explanation of what has changed in your financial situation that has made it difficult or impossible for you to make your monthly mortgage payments,” Sharga recommends.
“Briefly explain that your hardship is related to a loss of income, unexpected medical expenses, divorce, bankruptcy, or otherwise.”
Remember, you aren’t required to explain in detail or submit proof of this hardship or extra documentation with your letter.
“However, there’s a chance that, when it comes time to discuss repayment plans later, servicers might ask for documentation of your financial circumstances,” adds Sharga.
In other words, just in case, be prepared to furnish proof of your hardship later if asked.
“Falsifying information during this process could be considered fraud or could give the servicer reason to demand immediate payment, with interest, of your deferred amounts,” Sharga says.
Lastly, the letter should “also include information about your loan and specify your preferred repayment options,” says Parker.
Hardship letter template
To simplify this process, SixFifty has created a free online tool to generate a hardship letter.
Alternatively, you can download a forbearance request/hardship letter template here, and change the names and details where needed. (Note that if you do not own Microsoft Word, you can download and open the file in Google Docs or Open Office.)
A sample letter is below.
To: Wells Fargo
From: John Doe
Date: April 09, 2020
Re: Request for Forbearance on Mortgage Loan
You are the servicer of my mortgage loan on the property located at 1234 Cherry Tree Lane, Silver Spring, Maryland 20910. My loan number is 1234567. I assume that, like most mortgages, my home loan is federally backed and subject to the forbearance protections in the newly passed CARES Act. I attest and affirm that I am experiencing a financial hardship caused by the COVID–19 emergency and request forbearance on my mortgage loan under the CARES Act for 180 days.
I understand that during the forbearance period, I may not be charged fees, penalties or interest beyond what I would have been charged had I continued to make all of my mortgage loan payments on time and in full. I also understand that I may shorten the forbearance period at any time and that, at the end of this forbearance period, I may request an additional forbearance period of up to 180 days. Finally, I understand that Fannie Mae, Freddie Mac, and federal agencies have directed mortgage companies to work with borrowers who request forbearance under the CARES Act on repayment options. I specifically request that you (1) do not make the payments I delay under the CARES Act due as a lump sum either at the end of the forbearance period or at the end of the loan period, and (2) do not increase my mortgage payments after the forbearance period.
Please confirm that you received my request for forbearance on my mortgage loan under the CARES Act. If my mortgage loan is not subject to the CARES Act, please let me know if you offer other forbearance options during the COVID–19 emergency. I appreciate your help during this difficult time.
Why a written forbearance request is important
“A hardship letter, clearly explaining your financial situation, provides a written document. This becomes part of your file with the mortgage servicer,” adds Sharga.
“Phone conversations aren’t typically saved as part of a borrower’s file. And they can be subject to the accuracy and efficiency of whichever person at the servicing company happens to take the call. Better not to leave something like this to chance.”
Ryan Parker, vice president of Legal Product for SixFifty, agrees.
“A letter provides borrowers with the ability to be specific about their requests for forbearance and to have a record of exactly what they asked for,” says Parker.
“We have heard of mortgage servicers pushing borrowers into their own forbearance programs that are less generous than the forbearance protections offered under the CARES Act.
“We have heard of mortgage servicers pushing borrowers into their own forbearance programs that are less generous than the forbearance protections offered under the CARES Act.” –Ryan Parker, VP of Legal Product, SixFifty
“A letter specifically asking for forbearance under the CARES Act creates a record that the borrower is pursuing forbearance protections provided by Congress.”
Parker says the hardship letter requesting forbearance can be emailed or faxed. But snail mailing it via registered mail (which provides you with a mailing receipt that the letter was delivered) is a better option, he says.
“Otherwise, there’s no way to confirm that your servicer received the letter,” Parker adds.
Should you request forbearance?
All the experts recommend the same thing: Continue paying your mortgage if you’re able.
Forbearance is already helping thousands of homeowners who have lost their jobs due to coronavirus.
But many of those people will end up with very large payments to make at the end of the forbearance period.
All the experts recommend the same thing: Continue paying your mortgage if you’re able.
Best case scenario, the amount that’s postponed can be added to the end of your loan or the loan can be restructured.
But even if you don’t have to pay back the missed payments as a lump sum, you end up extending your repayment period – and increasing the total amount you’ll pay in interest.
So, if you can, it’s in your best interest to keep paying your mortgage.
But if money is tight, forbearance is a viable option. It’s helping countless homeowners manage their budgets in a tough time.Show me today's rates (Jan 20th, 2022)