What does Coronavirus mean for your mortgage?
Here’s what you need to know – and what to do about it.
You may have heard that the CARES Act – the $2 trillion financial stimulus package – provides multiple benefits for student loans and student loan forgiveness. However, the CARES Act also offers mortgage relief. Like student loans, the CARES Act has two primary protections for homeowners who have mortgages owned or backed by the federal government. This means your mortgage can come through Fannie Mae, Freddie Mac or the U.S. Department of Veteran’s Affair (VA) to name a few. For these mortgages, the CARES provides the following:
- No foreclosures for 60 days after March 18, 2020; and
- If you experience financial hardship due to the COVID-19 pandemic, you can request a mortgage forbearance for 180 days.
While most mortgages are owned or backed by the federal government, yours may not be. If you’re unsure, contact your mortgage servicer (the entity where you send your payments) or the state government where you live to inquire about additional options to pay your mortgage. Your mortgage servicer can also tell you who owns your mortgage.
What is mortgage forbearance?
Mortgage forbearance works like this:
- You can temporarily suspend, or even reduce, your monthly mortgage payments.
- At the end of your forbearance, you will still have to repay your mortgage. Forbearance is not the same as mortgage forgiveness.
At the end of your mortgage forbearance, make sure your understand how you will be asked to repay your mortgage. There may be different payment options, so it’s important to understand the differences among options and mechanics of each option.
What if your mortgage is not owned or backed by the federal government?
If your mortgage is through a private lender or not owned or backed by the federal government, then:
- The CARES Act will not apply to your mortgage. (It’s very similar to private student loans, which are not covered by the CARES Act).
- Contact your mortgage servicer to discuss options. If you’re not sure who your mortgage servicer is, you can find out through the Mortgage Electronic Registration System.
- Your servicer or lender may have forbearance or similar options to pause your payments.
- Before agreeing to any alternative payment option, make sure you understand the financial implications.
Your state may have alternative forbearance or foreclosure protections
In addition to protections under the CARES Act, your state may have certain protections for mortgage borrowers. For example, New York Governor Andrew Cuomo suspended mortgage payments for 90 days for borrowers who face financial hardship due to Coronavirus, such as losing their job.
How do you pay back your mortgage after forbearance?
Generally, there are several ways to pay back your mortgage after forbearance, including:
- A lump-sum payment at the end of your forbearance;
- Higher monthly payments; or
- A lump-sum payment at the end of your mortgage.
There may be alternative options. Federally-backed mortgages through Fannie Mae, Freddie Mac, the VA and other agencies have specific forbearance repayment options. Freddie Mac, for example, can provide forbearance for up to 12 months, waive penalties and fees, and offer loan modifications, among other benefits. Check with your mortgage servicer for details.