In 2020, as a result of the coronavirus, the US government introduced the CARES Act for federally backed mortgages. The CARES Act is a mortgage forbearance program that allows homeowners to pause their loan payments for up to 360 days during the pandemic.
Merriam-Webster defines forbearance as a refraining from the enforcement of something (such as a debt, right, or obligation) that is due.
Originally set to expire on December 31, 2020, a January 2021 decision by the U.S. Department of Housing and Urban Development extended FHA loan forbearance eligibility to March 31st.
This means you have until March 31, 2021 to request forbearance from your mortgage lender. And, because of COVID-19’s global impact, mortgage forbearance during the pandemic will not count against you on your credit report if your mortgage was paid on time and is in good standing before you requested forbearance.
From the Experian blog:
The law requires creditors to report any account that has a payment accommodation applied to it as current to the credit bureaus—as long as the account was current when the accommodation was made. Here are two scenarios you could experience under the CARES Act:
- If your loan is considered current (not past due) at the time you make an agreement with your creditor to modify repayment, the creditor needs to report to the credit bureaus that you are current on your loan.
- If your loan is considered delinquent (past due) when you make an agreement with your creditor, your status will continue to show as delinquent until you bring the account back into good standing. Once you bring the account current, the creditor must report your status as current to the credit bureaus.
Forbearance assumes you’ll be back to work quickly, at a similar rate of pay, and able to resume your mortgage payments.
It’s important to note that forbearance does not take place automatically if you stop making payments! Don’t stop paying your mortgage until you discuss available options with your lender or you’ll forfeit protections you would normally receive under a correctly executed forbearance program.
Options your mortgage servicer may offer include:
While you must repay all of your missed payments, under the CARES Act, you won’t be forced to make one huge lump sum payment like you would under a forbearance program initiated outside of the CARES Act.
Also, you won’t have to provide proof that your hardship was caused by the pandemic. Just tell your mortgage servicer that your hardship is a result of COVID-19, and they are required to accept your word on the matter.
Pros of requesting mortgage forbearance under the CARES Act:
Cons of requesting mortgage forbearance under the CARES Act:
Note: Avoid scams by contacting your mortgage servicer directly. Don’t respond to incoming phone calls, especially if the caller requests fees to provide you with a forbearance service. Never, ever give your personal information out to someone who calls you, even if they claim to be from your mortgage company.
If you and your spouse are considering divorce, I recommend speaking with a Certified Divorce Lender or a Certified Divorce Real Estate Expert before entering into a forbearance agreement. Getting qualified help can keep you from getting stuck in a situation you’re trying to escape.