What Is The Cares Act
The CARES Act is a law passed in late March 2020 that is intended to help provide funding for economic relief related to temporary shutdowns and job losses. Among other things, the economic provisions of the act led to the Paycheck Protection Program and expanded unemployment assistance along with some emergency loan funding. Another big item that was reported on was a temporary waiver of student loan interest payments.
Additionally, funding is provided for various health care provisions, such as a rapid vaccine development program, health care workers support and money and guidance to address a shortage of personal protective equipment and other crucial items related to dealing with COVID-19 and similar situations.
One of the other sections of the act calls for lenders to provide mortgage forbearance programs. Let’s take a look at this mortgage assistance and how it works.
How Homeowner Assistance Funding Works
Treasury is authorized under the American Rescue Plan to provide a HAF award to:
- Tribes or their TDHEs
- Department of Hawaiian Home Lands
HAF programs distribute assistance to eligible homeowners to cover qualified expenses related to mortgages and housing.
Depending on the program, homeowners may use the HAF assistance for expenses such as, mortgage payments , property taxes, homeowners insurance, homeowners association fees, utilities , internet service, and certain home repairs.
Find out more information about how HAF programs work on the interagency housing portal hosted by the Consumer Financial Protection Bureau .
What If I Still Cannot Service My Loan After The Forbearance Period
Getting back on your feet may take some time, perhaps longer than expected. Most institutions give borrowers up to 180 days of forbearance with a possible extension of several months. For example, the FHA offered forbearance of 12 months and up to two additional extensions of three months each. This means you can secure FHA forbearance for a cumulative period of 360 days.
There is no need to wait till the end of your forbearance to request an extension. It is always best to reach out to your mortgage servicer as soon as possible and negotiate on all the options on the table. Alternatively, you can always explore additional assistance, which may come in reduced monthly payments or loan modification.
You can also source additional help from other programs funded by the Consolidated Appropriations Act and the American Rescue Plan Act of 2021 under the Homeowner Assistance Fund and the Emergency Rental Assistance Program.
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Allocations For States And Territories
The statute requires the Department of the Treasury to make allocations for each state, the District of Columbia, and Puerto Rico based on homeowner need, determined by reference to the average number of unemployed individuals and the number of mortgagors with mortgage payments that are more than 30 days past due or mortgages in foreclosure. The statute establishes a minimum allocation of $50 million for each state, the District of Columbia, and Puerto Rico.
For Guam, American Samoa, the U.S. Virgin Islands, and the Commonwealth of the Northern Mariana Islands, there is a $30 million territorial set-aside, to be allocated based on each territorys share of the combined population of all four of these territories.
What Are The Benefits Of Acquiring A Mortgage Relief
A mortgage relief program does more than suspend the borrowers payment for a limited period. Some of the benefits packaged under the program include:
- Zero interests, late fees, and additional penalties-Late repayments of loans usually come with hefty penalties, but a forbearance protects you from all the additional costs for granted period
- No reports to credit bureaus- forbearance offers the security from lenders who would usually report loan defaulters to credit bureaus, consequently affecting your credit rating.
- No evictions and foreclosures- for the COVID-19 mortgage relief, the government granted a moratorium on foreclosures and evictions for all federally backed mortgages.
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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
Consumer Relief Guide Your Rights To Mortgage Payment Forbearance And Foreclosure Protection Under The Federal Cares Act
This guide was originally issued in May 2020 as a joint effort of the Conference of State Bank Supervisors , the organization representing state financial regulators, and the Consumer Financial Protection Bureau . 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 . This guide contains information to help you make important decisions about your financial obligations.
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Other Options To Mortgage Forgiveness
If this date with the IRS sounds ominous, it should. If it has you thinking about other options to your underwater mortgage conundrum, all the better.
If youre certain you cant achieve a livable refinancing arrangement and losing your home is certain, consider these options.
Short sale: In a short sale, a lender agrees to accept the sale price of your home as payment in full on your mortgage. Yes, even if the house sells for less than you owe. Again, however, theres that cancelation of debt problem, triggering a tax bill. The house goes on the market just as any other house, and knock on wood you receive offers as you normally would. You forward them to the lender, who decides which one to accept. When an offer is approved, your house sells, and you move out. If theres a deficit, youre not on the hook except to the IRS.
Deed-in-lieu of foreclosure: This is the old hand-over-your-keys-and-walk-away gambit. Rather than force your lender to go through the expensive, time-consuming process of a foreclosure, you leave your home voluntarily and sign it over to your lender. In exchange for not having to fight, the lender accepts your home and cleans your slate. If theres a deficit when the house sells, the lender eats it but also reports it to the feds, meaning, again, taxes will be due.
Deadline To Get A Forbearance For Fannie Mae And Freddie Mac Loans
Fannie Mae and Freddie Mac haven’t issued any guidance giving a deadline to request an initial forbearance. The latest guidance from Fannie Mae says that its forbearance policies are “effective immediately and are effective until Fannie Mae provides further notice, unless otherwise stated.” Similarly, Freddie Mac’s issued Bulletin 2020-4 states that the forbearance plan guidelines announced in the bulletin are effective immediately. The bulletin also says, “Freddie Mac will continue to monitor the situation and may revise or revoke this temporary guidance at any time, as appropriate.”
So, it’s currently unclear exactly how long borrowers get to request forbearances for Fannie Mae and Freddie Mac mortgage loans. It’s reasonable to assume you may request a CARES Act forbearance until these entities issue further guidance. Most likely, you may request an initial COVID-19 forbearance while the COVID-19 National Emergency is still in place.
Forbearance Extensions for Fannie Mae- and Freddie Mac-Backed Loans
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How To Get Help
If you think you might have trouble making a mortgage payment your first call should be to your mortgage servicer . They may be able to arrange temporary mortgage assistance options, including a mortgage forbearance plan.
No matter what the future brings, Fannie Mae will be here to help, providing you with the reliable information you need about forbearance plans and other kinds of mortgage assistance.
If you’re a homeowner who is financially impacted by COVID-19, you’re not alone. Our Loan Lookup tool can help you see what free resources are available to you.
How To Refinance Second Mortgages Heres What You Need To Know
Many homeowners refinance their mortgage at least once during the lifespan of their loan. If you already have a second mortgage, you may not have considered the possibility of refinancing your second mortgage. Refinancing second mortgages may prove to be beneficial for homeowners who are looking for lower interest rates and monthly payments.
Refinancing a second mortgage is generally similar to refinancing the first mortgage, but there may be different reasons to refinance again.
If you want to learn about refinancing your second mortgage, then read on. Youll need to take some steps in order to refinance.
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Financial Help For Homeowners And Landlords
Forbearance is not the same as forgiveness. Forbearance only puts off the inevitable day when paused payments must be made up. Programs funded by the Consolidated Appropriations Act, 2021 and the American Rescue Plan Act of 2021 provide financial assistance to homeowners and landlords under two programs: the Homeowner Assistance Fund and the Emergency Rental Assistance program.
How To Request Forbearance
As a homeowner with a federally backed mortgage loan, you will need to contact your loan servicer to request forbearance. You do not need to submit extensive documentation, mainly only affirmation of your financial hardship, which you can do over the phone. Your initial forbearance can be for up to 180 days. Depending on when your initial forbearance began, you can extend forbearance an additional 180 or even 360 days.
Landlords of multifamily units must have been current on payments as of Feb. 1, 2020, to be approved for forbearance relief. If applicable, landlords should submit an oral or written request to their servicer, who can approve the initial 30-day forbearance, with subsequent extensions of up to an additional 60 days.
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The Homeowner Assistance Fund
The Homeowner Assistance Fund was established under President Bidens American Rescue Plan to assist homeowners struggling with their housing payments due to Covid.
HAF was funded with close to $10 billion in financial support to help families weather these challenges and remain in their homes. According to the Treasury press release, aid money will be prioritized for homeowners with pending foreclosures and those with immediate threats to housing stability.
Those who receive assistance through the Homeowner Assistance Fund can use the money for mortgage payments as well as other housing-related bills like homeowners insurance and utilities.
HAF funds are allocated state by state, and its up to state administrators to distribute the funds to individual homeowners who qualify for aid. If you think you might benefit from the Homeowner Assistance Fund, reach out to your loan servicer to talk about whether youre eligible.
You can also use this lookup tool from the Consumer Financial Protection Bureau to find active mortgage relief programs in your area.
Us Department Of The Treasury
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Looking for homeowner assistance?
Homeowners can find out what homeowner assistance covers, how it works, and whos eligible on the interagency housing portal hosted by the Consumer Financial Protection Bureau .
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New Biden Legislation Offers Homeowners Additional Coronavirus Mortgage Relief
The Coronavirus, Aid, Relief, and Economic Security Act directed lenders holding federally backed single-family mortgages to suspend borrowers payments for up to a maximum of 360 days if they experienced financial hardship due to the coronavirus outbreak. Similar but shorter forbearance was available to owners of multifamily units with federally backed mortgages.
Subsequent legislation, including the Consolidated Appropriations Act, 2021 and the American Rescue Plan Act of 2021, as well as presidential executive actions, have resulted in additional mortgage relief in the wake of the 2020 financial crisis.
The Cares Act Prohibits Fees Penalties And Additional Interest
During the forbearance period, the servicer can’t charge fees, penalties, or interest beyond the amounts scheduled or calculated as if you made all contractual payments on time and in full under the terms of the mortgage contract.
Payment Deferral Option Under Federal Law
An amended federal law allows loan servicers to offer a “payment deferral” option to homeowners who finish a coronavirus-related forbearance, without requiring a complete loss mitigation application. If you accept the servicer’s offer, you pay the skipped payments at the end of the loan . In return, the servicer gets out of having to comply with some federal mortgage servicing requirements.
This kind of payment deferral plan isn’t limited to just CARES Act forbearances. All borrowers with coronavirus-related forbearances, even those who don’t have federally backed mortgage loans, are potentially eligible.
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Fmerr: The Enhanced Relief Refinance Program
Editors note: Freddie Mac has temporarily paused the FMERR program due to a low number of applicants. With home equity increasing nationwide, many owners are eligible to refinance without needing a special program like FMERR. Contact a lender to check your equity levels and find out whether you qualify for a refinance.
For borrowers with a mortgage through Freddie Mac, Freddie Macs Enhanced Relief Refinance program was created to help homeowners with limited equity take advantage of historically low interest rates and reduce their monthly payments.
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No Extra Penalties Interest Or Late Fees
During any forbearance period granted to you, your servicer cannot charge any penalties, interest, or fees that would not have been charged if you had made your payments on time and in full. Landlords may not charge tenants any fees or penalties for late payment of rent during any forbearance period granted to the landlord.
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Streamline Refinancing For Fha Va And Usda Loans
Popular mortgage relief programs since 2009 have only been available to homeowners with conventional mortgages backed by Fannie Mae or Freddie Mac.
But what if your loan is government-backed?
Homeowners with federally-backed FHA, VA, and USDA mortgages have access to different mortgage programs than those with conventional loans. Namely, they can use a Streamline Refinance.
The Streamline Refinance is a special mortgage refi program for people with government-backed loans. Its similar to a mortgage relief refinance because you can use a Streamline Refi even if your home is underwater or has very little equity.
And a Streamline Refinance has other benefits, too.
- Theres less paperwork because you dont have to re-verify your income or employment or get the home appraised
- Government-backed loans typically have below-market mortgage interest rates
- Closing costs are typically cheaper
Homeowners can qualify for an FHA Streamline if theyve made at least three consecutive on-time payments on their existing FHA loan.
Even if you make your three consecutive payments while in forbearance, you may qualify for FHA Streamline refinancing. The Department of Housing and Urban Development , which oversees the Federal Housing Administration, is one of the more lenient housing agencies.