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    CARES Act – Mortgage Forbearance Explained

    COVID019 Mortgage Forbearance

    There is so much information floating around regarding the CARES Act and what it means for people in all different situations. For single family homeowners with FHA-insured mortgages, mortgage service providers have been instructed to offer deferred or reduced mortgage payments (called forbearance) by as much as 6 months to start to those with COVID-19 related financial hardship.

    “The last thing any of us wants is for Americans to lose their homes unnecessarily while we continue to fight this invisible enemy. If you’re struggling, immediate help is now available. The FHA will continue to work with stakeholders to ensure that the loss mitigation options that are offered for both forward and reverse borrowers are appropriately tailored for the present situation,” said HUD Secretary Ben Carson, via press release.


    Below is a statement we received from a local lender, compiled from MBS Highway data:

    The Covid-19 Coronavirus has led to some challenging times for all of us.

    The Government has created the CARES Act to assist homeowners whose income may have been adversely impacted by the coronavirus.  One of the components of the CARES Act is the possibility of mortgage forbearance.

    Forbearance is often misinterpreted.  Many people are mistakenly thinking that forbearance equals forgiveness.  It does NOT.  This is truly intended as temporarily relief for those who need it most.

    Forbearance means that the payments will be suspended for a short period of time, initially up to 6 months, but will need to be caught up when the forbearance period is over.

    Think about when you buy something at a furniture store that offers “no payments” for 3 months.  You still must pay for the furniture…the payments are just deferred.

    There is absolutely no financial benefit by exercising forbearance, as you will either have to pay a lump sum, modify your loan, or owe the balance when you refinance or sell your home.

    If you really need to exercise forbearance, you cannot just decide to stop making payments.  You must notify your Mortgage Servicer and agree to the forbearance terms.

    Depending on your situation, mortgage providers may be able to help by eliminating your debts, lowering your payment, and giving you a cash cushion during these turbulent times.


    The Federal Housing Administration has published a Q&A for consumers with FHA-insured mortgages that contains very helpful details which can be found at at https://www.hud.gov/sites/dfiles/SFH/documents/COVID-19HomeownerHelp.pdf.

    For more details and details on questions you should ask your mortgage service provider, check out this video produced by ConsumerFinance.gov

    If you or someone you know is considering selling their home during this time, please reach out to our team. Our brokers are keeping abreast of the latest Stay Home Stay Healthy restrictions, and local real estate market news and trends.

     

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