Homeowners who have lost income due to the COVID-19 crisis have been worried about the prospects of foreclosure this year.
In March, the S.C. Supreme Court and the federal government halted foreclosures for a few months. Since then, the five federal agencies that own or insure most of the mortgage loans in the U.S. have extended foreclosure moratoriums for their mortgages through at least December 31, 2020. The “Big Five” are Fannie Mae, Freddie Mac, the Federal Housing Administration (FHA), the US Department of Agriculture (USDA) (through the Rural Development Program), and the US Department of Veterans Affairs (VA). There is no foreclosure moratorium for private mortgages that are not owned or insured by one of the Big Five.
If you have a mortgage backed by one of the Big Five you can obtain a payment forbearance if you cannot make a mortgage payment because you have had a COVID-19 related financial hardship. A forbearance means that you may put off, or “forbear,” making mortgage payments for a set period of time. The payments are not forgiven and will come due at the end of the forbearance period. If you have a COVID-19 related hardship, you can ask your mortgage company for a “CARES Act Forbearance.” If you are eligible, then you should get a CARES Act Forbearance that will last up to 180 days. You should not have to prove you suffered a COVID-19 related financial hardship, and you should not be charged late fees or penalties during the forbearance. You can ask for another 180 days if your circumstances have not improved by the end of the first CARES Act Forbearance. You will still owe the money that would come due during this time. You normally would have to pay it all in a lump sum at the end of a forbearance period. But if your mortgage is backed by one of the Big Five, you have other options.
Fannie Mae and Freddie Mac: If you were current on your payments and can afford to resume payments when it ends, you can get a special COVID-19 Payment Deferral, which moves your missed payments to the end of the loan. If not, you can apply for a loan modification. This would change the terms of the loan to make the payment more affordable.
- FHA and HUD: Depending on whether you were current before the forbearance, they may offer a mixture of Partial Claims (placing arrears into a junior lien that is repaid when you refinance or sell the home, or at the end of the loan), loan modifications, or both. They may offer other programs as well.
- USDA: If you can resume your payments, you can get a repayment plan or extend the term of the loan by the length of the forbearance. If you cannot resume your payments, you can ask them to review you for their standard loss mitigation options.
- VA: You may request a deferral program, repayment plan, or loan modifications depending on your needs. They cannot require you to make a lump sum payment at the end of the forbearance.
These programs are not automatic! You must reach out to your mortgage servicer to ask for this help. If you get a forbearance under the CARES Act, you should reach out again before the forbearance ends to discuss your options about how the missed payments will be repaid. If you do not have a mortgage backed by one of the Big Five, you still should ask your loan servicer what options it has to avoid foreclosure.
Call SCLS at (888) 346-5592 or apply online at www.sclegal.org if you get a foreclosure notice or if you have any questions about foreclosure issues.