The CARES Act Explained: Part 3 | Mortgage Loan Relief
- Homebuying & Homeownership
- Stacey Sickler
With the recent legislation passed by the U.S. Congress in the form of the CARES Act, many C&N customers rightfully have lots of questions. Our experts have developed a series of helpful summaries to better explain the key things you need to know and the types of relief options that may be available to you.
In the third part of our series, we explain the options available to homeowners facing challenges with their finances. Even if you don’t have a mortgage or aren’t having trouble making your monthly payments, the information shared here may help someone you know.
What Types of Mortgage Relief Are Available?
While the CARES Act provides a certain degree of uniformity at the federal level, there still may be differences in how the relief is structured. The Act gives two major types of relief to homeowners with federally backed loans:
- it blocks lenders from starting foreclosure proceedings on federally backed loans for at least 60 days starting on March 18, 2020.
- it gives homeowners who are experiencing financial hardships because of COVID-19 the option to request up to 180 days of forbearance on their mortgage. That forbearance allows you to pause or reduce your mortgage payments, but it’s not loan forgiveness. If, after six months, you’re still experiencing financial difficulties, you can request up to another 180 days.
4 Things You Need to Do if You Need Help
1. Understand that “forbearance” is not “forgiveness.”
Forbearance is essentially putting a pause on your mortgage payments for a few months. In some cases, interest may continue to accrue during the forbearance period. Also, many times, the words “forbearance” and “deferral” are used interchangeably. There’s no real difference. Regardless, you need to be clear on the terms, or structure, of this payment pause. With some mortgage relief programs, you may owe all of your missed payments when the forbearance period ends. Others may add those missed payments to the end of the mortgage term instead.
Depending upon the type of loan, the deferred payments may be set up on a repayment plan and spread out over the following 12 months. The Federal Home Loan Bank has indicated Fannie Mae and Freddie Mac may come out with longer repayment options at a later date. Under the CARES Act, for a federally backed mortgage (FHA, USDA or VA), a homeowner can request the maximum 180 days of forbearance. For other types of mortgages, loan servicers have more control over the length and structure of the forbearance program. Most, like C&N, are currently offering 90-day forbearances, but that will vary.
Finally, if your loan has PMI (private mortgage insurance) and/or escrow, those portions still need to be paid during the forbearance term to prevent from going negative at the end of the year, which would result in a lump sum payment or an increase in 2021 escrow payment amount.
2. Be proactive.
None of the mortgage payment relief options currently available are automatic. So, if you need relief, reach out and connect with your lender. We can guide you through your options and determine the right solution for your situation.
Also, things are evolving and changing rapidly. Pay attention to news — especially updates from C&N — to see if additional programs become available. You may need to re-apply in order to take advantage of them. As new programs are introduced, we will proactively share information but keeping yourself informed is important too.
3. Be patient.
There are millions of Americans who are requesting some kind of mortgage assistance, which means it might take longer than usual to get answers and to make things happen. C&N recommends that you use online forms whenever possible, like email and our COVID-19 Relief Request located on our homepage. Using a trackable interface, such as C&N’s Online Mortgage Experience, is preferable so that you can keep a record of your correspondence. While the CARES Act does not require homeowners to present documentation to get forbearance, they do need to attest “to a financial hardship caused by the COVID-19 emergency.”
4. Get it in writing and check your credit report.
Once you’ve settled on a relief program, your lender will provide written documentation that confirms the details of your agreement. If they don’t, make sure to ask.
You should also monitor your credit report. Under the CARES Act, those who receive mortgage forbearance will also receive credit protection if they are up to date on their payments. That means your lender should continue to report the mortgage as “current” to the credit bureaus as to not negatively affect your credit scores.
It can be challenging to fully understand and decipher these changes when they are enacted. The C&N team is committed to keeping you informed & prepared as more details of the CARES Act and other COVID-19-related legislation are released and better understood.
Stacey Sickler is the Mortgage Lending Team Leader at C&N. Stacey has been in Mortgage Lending for 21 years including 13 with C&N. She is responsible for originating residential mortgages, including purchase, refinance, new construction and land financing, in Bradford County, PA and the Southern Tier of NY. Stacey's office is in our Sayre Branch located at 1827 Elmira Street, Sayre, PA 18840.
She holds her B.S. Degree in Business Administration and Finance from Susquehanna University and is a graduate of the Advanced School of Banking at Bucknell University. She is also a graduate of the NY Penn Leadership Program. Active in her community, Stacey is treasurer of the Spalding Memorial Library and a member of the Choices Program and her children’s school PTG.
Stacey and her husband, David, have two children and live in the Athens area.
"There is nothing more gratifying than helping people realize the dream of homeownership. It's an exciting time for them and I feel fortunate to be a part of it."