On March 27, 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The CARES Act gave people with federally backed mortgages certain temporary protection from foreclosure.
What is a federally backed mortgage under the CARES Act?
- A federally backed mortgage is a mortgage that is issued, purchased, or insured by one of the following government agencies: Fannie Mae, Freddie Mac, the United States Department of Veteran’s Affairs (VA), the Federal Housing Administration (FHA), and the United States Department of Agriculture (USDA).
Although the CARES act has expired as of 12/31/2020, all of the agencies that insure or guarantee federally backed mortgages (FHFA, FHA/HUD, VA, or USDA) have extended the deadline to request a forbearance into 2021. The deadline varies depending upon which agency backs your mortgage.
How do I find-out if my mortgage is federally backed?
- Check these websites to find out if you have a Fannie Mae or Freddie Mac mortgage:
- Call HUD at 1-877-622-8525 and ask if you have an FHA mortgage.
- Call your loan servicer and ask if you have a federally backed mortgage.
- Send your loan servicer a “Request for Information” letter. In the letter, ask who owns your mortgage. Also ask if a federal agency issued, purchased, or insured it. The letter must be sent to the address where your loan servicer accepts “Request for Information” letters. This address is usually listed on your loan servicer’s website.
- For more instructions about finding out who owns your mortgage, including how to write a “Request for Information” letter, visit www.consumerfinance.gov/ask-cfpb/how-can-i-tell-who-owns-my-mortgage-en-214/
What are my rights to avoid foreclosure if my loan is federally backed?
- Your lender cannot foreclose on you until at least February 28, 2021 if you have a loan insured by the FHA, backed by the FHFA (via Fannie Mae or Freddie Mac), or backed by the VA. The USDA has extended its bar against foreclosures on loans the USDA backs through March 31, 2021. In Texas, foreclosure sales are only held on the first Tuesday of every month.
- If you need it, your lender must offer you a forbearance agreement to temporarily suspend or reduce your mortgage payments. You are required to tell your mortgage servicer, either in writing or via phone call, that you’re experiencing a financial hardship due to the economic impacts of COVID-19. Some mortgage servers may also require you to fill out an online form. The forbearance agreement can last up to 180 days. If you ask, the forbearance agreement can be extended up to another 180 days.
What is a forbearance agreement?
- A forbearance agreement is a short-term agreement with your lender that modifies your mortgage payments and limits your lender’s right to foreclose. Under a forbearance agreement, your mortgage payments may be temporarily lowered or temporarily postponed.
What are some important things I need to know about forbearance agreements?
- A forbearance agreement does not cancel your requirement to pay your mortgage. After the forbearance agreement ends, you will have to pay back all of the mortgage payments that you put-off.
- Before you agree to a forbearance, make sure you understand up-front how you will be required to pay-back your mortgage. For example, you may need to make sure the lender will let you pay back your mortgage in installments instead of in one lump sum. Your lender can foreclose on you in the future if you do not pay back your mortgage payments according to the terms of the forbearance agreement!
- Even with a forbearance agreement, some people still have mortgage-related expenses to pay – such as property taxes and homeowners insurance – if they do not have an escrow account. Ask your lender to tell you if you have any expenses to pay while you are under a forbearance agreement.
- During a forbearance agreement, your mortgage service is not allowed to report that you aren’t making mortgage payments to any credit reporting agency; the forbearance agreement should not cause you to have negative information included on your credit report.
What can I do if my mortgage is not federally backed?
- Only about two thirds of mortgages in the United States are federally backed.
- If your mortgage is not federally backed, your lender might (but does not have to) offer you some kind of forbearance agreement to avoid foreclosure. Call your loan servicer or check your loan servicer’s website.
- Your loan might be owned by a company other than your loan servicer. Ask your loan servicer to tell you who owns your loan, or send your loan servicer a “Request for Information” letter as discussed above. Then, contact the entity that owns your loan to see if it is offering any forbearance options.
- If you can afford to pay your mortgage, go ahead and pay it.
- If you can’t afford to pay, find-out if you have a federally backed mortgage. If so, contact your mortgage servicer right away and ask to set-up a forbearance agreement. Make sure you understand the terms of the forbearance agreement before you sign-off.
If you don’t have a federally backed mortgage but can’t afford your payments, you should still contact your loan servicer right away. Your loan servicer or the entity that owns your loan might be voluntarily offering other temporary forbearance options to avoid foreclosure due to COVID-19.
Informational blog posts regarding COVID-19 will be continually updated to reflect the changes and extensions passed by the government over time.
Lone Star Legal Aid is a 501(c)(3) nonprofit law firm focused on advocacy on behalf of low-income and underserved populations. Lone Star Legal Aid serves millions of people at 125% of federal poverty guidelines that reside in 72 counties in the eastern and Gulf Coast regions of Texas, and 4 counties of southwest Arkansas. Lone Star Legal Aid focuses its resources on maintaining, enhancing, and protecting income and economic stability; preserving housing; improving outcomes for children; establishing and sustaining family safety and stability, health and well‐being; and assisting populations with special vulnerabilities, like those who have disabilities, or who are elderly, homeless, or have limited English language skills. To learn more about Lone Star Legal Aid, visit our website at www.lonestarlegal.org.
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