Can You Defer Your Mortgage Under the New CARES Act Forbearance Terms?

Cardinal Financial November 11, 2021 | 4 min read
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If you struggle to make your mortgage payments, CARES Act forbearance options might be able to help. Sure, we’ve come a long way since March of 2020, but the pandemic’s long-lasting effects continue to impact lives and livelihoods. Reducing or postponing home loan payments can decrease the financial burden of many still struggling to pay their bills, potentially helping them avoid foreclosure.

Considering mortgage deferment under the CARES Act? Here’s what you need to know – in plain English.

*Forbearance is a temporary period of time when you can pause or reduce your mortgage payments.
*The CARES Act is an acronym for The Coronavirus Aid, Relief, and Economic Security Act. The legislation provides support for Americans impacted by the pandemic and includes forbearance provisions to reduce home loss for individuals.

The basics of CARES Act Forbearance

You might not know it, glancing at the official CARES Act forbearance details, but the features are pretty simple:

  • Most homeowners can pause or reduce their mortgage payments, thanks to the CARES Act. (Forbearance applies to all federally-backed mortgages, including Fannie Mae, Freddie Mac, USDA, VA, and FHA. If your mortgage isn’t federally backed, your lender might still have a solution for you).
  • You don’t need to prove you’re struggling financially. Just let your mortgage lender know that you’ve been economically impacted by COVID-19.
  • For most loans, you won’t have to pay fees or penalties for taking advantage of forbearance.
  • Participating in CARES Act forbearance will not negatively impact your credit score (as long as you’re able to repay the delayed amount at the end of the forbearance period).
  • Forbearance can last between 3 months and 6 months, but you might be able to extend the period at the end of your window.

*The forbearance period is the duration of the mortgage loan payment delay (or reduction).

How do I know if I have a federally backed mortgage?

The short answer is that your loan servicer will know. So, who is this loan servicer and how do you ask them about your mortgage loan’s federal status? It’s as easy as looking at your latest mortgage statement. A company’s name (and maybe even a phone number) will be clearly identified on the statement. This is who will handle your forbearance if you qualify.

Just give your loan servicer a call to ask about forbearance options for your specific mortgage type.

*A Mortgage loan servicer is the company that collects your monthly mortgage payments. This could be the same company you worked with to obtain your loan, but it could also be a different one.

Yes, there are some downsides

CARES Act forbearance can be helpful and home-saving. But, there are some potential drawbacks.

  • Once your forbearance period is over, you’ll still be responsible for the delayed payments. The amount owed could be divided equally into your future payments (raising your monthly mortgage bill) or you may be required to pay it all at once. But, if you’re able to refinance your mortgage before your forbearance period ends, you might be able to avoid monthly payment hikes. Consider clarifying the repayment plan in writing before committing to forbearance.
  • Interest will still accrue. You won’t make your monthly mortgage payment during forbearance but interest will still be added to your loan amount.
  • Refinancing your home loan could be harder. Participating in a forbearance program might complicate a refinance application, but it doesn’t take refinancing off the table.

Recent updates to CARES Act forbearance

In September of 2021, COVID-19 relief options were extended for borrowers struggling to make mortgage payments due to the pandemic. The prolonged forbearance program allows borrowers newly experiencing financial hardship to request a six-month forbearance period. It also provides forbearance extension opportunities to those nearing the end of the forbearance timeframe. Keep in mind that different loan types could have different application deadlines.

CARES Act forbearance isn’t a cost-free solution for struggling homeowners. But, it could support you through temporary financial difficulties. And don’t forget that a mortgage refinance might be an opportunity to reduce your monthly payments without seeking forbearance. Contact a mortgage professional today to explore your options.

Just give your loan servicer a call to ask about forbearance options for your specific mortgage type.

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