The CARES Act Forbearance Agreement: What You Need to Know
In response to the COVID-19 pandemic, the United States Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, providing relief for individuals and businesses affected by the economic impact of the pandemic. One of the key provisions of the CARES Act is the forbearance agreement, which aims to help homeowners struggling to make mortgage payments.
What is a forbearance agreement?
A forbearance agreement is an agreement between a borrower and a lender that allows the borrower to temporarily pause or reduce their mortgage payments. Typically, forbearance is granted in cases of financial hardship, such as a job loss, serious illness, or major expense.
Under the CARES Act, homeowners experiencing financial hardship due to the pandemic can apply for forbearance for up to 180 days, with the option to extend for an additional 180 days. During the forbearance period, the borrower is not required to make their mortgage payments, and no fees, penalties, or interest will accrue.
Who is eligible for the CARES Act forbearance agreement?
To be eligible for the CARES Act forbearance agreement, you must have a federally backed mortgage. This includes mortgages owned or guaranteed by Fannie Mae, Freddie Mac, the Federal Housing Administration (FHA), the Veterans Administration (VA), and the Department of Agriculture (USDA).
If you are unsure if your mortgage is federally backed, you can check with your mortgage servicer. They are required to provide information regarding your mortgage and forbearance options under the CARES Act.
How do I apply for forbearance under the CARES Act?
To apply for forbearance under the CARES Act, you should contact your mortgage servicer and explain your financial hardship due to COVID-19. You will need to provide documentation of your hardship, such as a letter from your employer or medical provider.
Your mortgage servicer should provide you with information about the forbearance process and how to request an extension if needed. It is important to note that while you are in forbearance, you should continue to communicate with your mortgage servicer about your financial situation and any changes that may affect your ability to make mortgage payments.
What happens after the forbearance period?
After the forbearance period ends, you will need to work with your mortgage servicer to determine the best way to repay the missed payments. This may include a repayment plan, loan modification, or other options.
If you are unable to resume making mortgage payments, you should contact your mortgage servicer to discuss other options, such as selling your home or pursuing a short sale or deed in lieu of foreclosure.
Overall, the CARES Act forbearance agreement provides important relief for homeowners struggling to make mortgage payments due to the pandemic. If you are experiencing financial hardship, you should contact your mortgage servicer to explore your options under the CARES Act.