Ultimate CARES Act Foreclosure Moratorium Guide to help homeowners with behind mortgage loan payment program By Boracina Cash Home Buyers is here to help if you need to sell your house fast include free local professional moving assistance service near me when you sold your property to us, Worrying about your piling mortgages? Take advantage of the provisions of the CARES Act for a foreclosure moratorium. This aims to help American homeowners and borrowers in surviving the crisis of today.
What Is the CARES Act?
The CARES or the Coronavirus Aid, Relief, & Economic Security (CARES) Act is a bill introduced by the 116th U.S. Congress on January 24, 2019. It was passed by the Senate on March 25 and approved into law by President Donald Trump on March 27. The coronavirus outbreak dramatically reduced economic activity, not only in the USA but also in the world.
The pandemic is also one of the causes of the stock market crash, dating back to February 20, 2020. To flatten the curve of the virus, social distancing, working from home arrangements, cancellation of school activities, and travel restrictions are implemented. This brought the closure of several businesses, as well as the shifting of face-to-face classes to online classes.
In response to the drastically affected lives of the Americans, the act was introduced to provide relief of $2 trillion to healthcare providers and distributors, business owners, workers, and students. Funds were allocated to medical industries and personal protective equipment, loans were given to small business, tax deductions and deferrals were implemented, unemployed benefits were established, and cash grants were provided, especially to higher education students to cover the costs of food, housing, course materials, and gadgets for school.
CARES Act: Foreclosure Moratorium
Among the provisions of the CARES Act is the foreclosure moratorium, found in Section 4022, which emphasizes foreclosure moratorium and the borrower’s entitlement to ask for forbearance; Section 4023, which focuses on forbearance for loan payments; and Section 4024, which offers protection from eviction. These provisions apply foreclosure moratorium nationwide for federally backed mortgagors, who are immediately or remotely affected by the COVID-19 pandemic.
- A forbearance of 360 days shall be granted to federally backed mortgagors with affirmed financial struggle due to COVID-19.
- Federally backed loan servicers shall grant 180 days period for borrower’s affirmation, without requiring further documents, costs, fees, or interests. This may also be extended as per the borrower’s plea.
- The forbearance period shall protect the borrower from fees or penalties and shall see that the amount of payment remains as if the borrower paid completely and on or before the
- A period of at least 60 days, starting from March 18, 2020, shall prohibit federally backed loan servicers from processing and executing foreclosure activities, except for empty or abandoned properties.
- A forbearance of 30 days, with two 30-day extensions, shall be granted to a borrower with a federally backed multi-dwelling mortgage if requested.
- No eviction shall proceed for the failure of payment for a tenant of a multifamily property. Fees and penalties are also suspended.
- Moratorium on evictions shall be granted for a tenant occupying a Covered Property, which is defined as any owned facility that belongs to a covered housing program or a rural housing program.
- No eviction proceeding shall be filed for the failure of payment for 120 days, starting on March 27, 2020. Fees and penalties are also suspended.
In summary, the moratorium is active as of March 18, 2020 until May 18, 2021. The CARES Act directs that foreclosure activities shall be halted, and no new proceedings shall be initiated on federally backed mortgages.
What does ‘Federally Backed Mortgages’ mean?
The foreclosure moratorium provisions only protect federally backed mortgages. This means that the loan must be backed by (A) Federal Housing Administration (FHA), (B) U.S. Department of Housing and Urban Development (HUD), (C) U.S. Department of Agriculture (USDA), (D) U.S. Department of Veterans Affairs (VA), or (E) U.S. Congress mortgage companies such as Freddie Mac and Fannie Mae.
Moreover, residential borrowers are the only ones qualified for the moratorium, excluding commercial and small enterprise borrowers.
How to Benefit from the Foreclosure Moratorium
The foreclosure moratorium is just a moment of relief. Problems may arise after the moratorium; thus, here are some dos during the period.
Talk to your mortgage provider.
The moratorium is immediately in effect; however, communication is still the key to help your provider assess and help you in the trying time of COVID-19. The servicer can also provide the details of the owner of your mortgage. Usually, the bank functions as your provider while a federal organization, such as USDA or Freddie Mac, owns the loan. The provider’s contact information is shown in the monthly statement. Due to the COVID-19 crisis, an extended hold period can be expected; thus, patience is a virtue. Maintaining good communication with your provider will help you during and after the moratorium period.
Request a forbearance.
The CARES Act provides two mortgage relief choices: the forbearance and the foreclosure moratorium. Take advantage of these options by finding if you are qualified for these mortgage protections. Make sure that your mortgage is backed by a federal organization, and if so, explicitly request a forbearance.
Placing your mortgage into a forbearance of 180 days results in the remainder in your home with a halted loan for the meantime. Use these several months to find a job in case of unemployment, improve your credits, and achieve financial security. Get back on your feet to be able to pay your mortgage religiously again.
Ask about other mortgage relief options.
Aside from the CARES Act, other options include partial claims and loan modifications. A partial claim is a loan with no interest programmed by HUD to allow the borrower to catch up on the overdue payments. This can be paid after the original mortgage is settled. Meanwhile, loan modification refers to a change in the term/s in one’s mortgage. This can lower monthly payments by lowering the interests, or this can extend the duration of paying off the mortgage. A partial claim can be finished with loan modification sometimes.
Other Ways to Foreclosure
If moratorium cannot retain your house, some alternatives include Deed in Lieu of Foreclosure and Pre-Foreclosure Sale or Short Sale. You may lose your home, but you can save yourself from costly troubles such as proceedings and credit damage.
Deed in lieu of foreclosure is an agreement that can be negotiated, depending on your lender. This allows the borrower to transfer the property to the lender and be released from the mortgage debt and prevent foreclosure. In other words, it is the voluntary surrender of your house to avoid the costly process. Furthermore, this is often done discreetly to save yourself from being embarrassed by a public foreclosure notice.
Pre-foreclosure or short sale refers to selling your property for a lower price than the mortgage loan. Due to delinquency on payments, the property will go to its pre-foreclosure phase, where the lender places a default notice on it. The borrower can opt to short sale the house to help reduce the mortgage debt.
Both alternatives need agreement from both parties (the lender and the borrower). Thus, as emphasized, it is important to communicate with your loan provider during the foreclosure moratorium.
This CARES Act ultimate guide to foreclosure moratorium informs readers about the act’s provisions, the eligibility rules, steps on how to benefit from it, and some alternatives. Arming yourself with the right knowledge can protect you from the financial crisis brought by the coronavirus pandemic.
CARES Act Mortgage Forbearance Relief Explained: What You Need to Know