What are Your Rights as a Struggling Borrower Under the CARES Act
For millions of borrowers who are struggling to pay their mortgage, help is on the way under the Coronavirus Aid, Relief, and Economic Act a.k.a. the CARES Act. When you contact your mortgage servicer or lender to get financial relief, it’s important that you know your rights as a homeowner.
The Consumer Financial Protection Bureau (CFPB) and the Conference of State Bank Supervisors (CSBS) released a guide to help you understand your rights when seeking loan forbearance.
The right to seek forbearance under the CARES Act
Basically, you’re eligible to seek loan forbearance under the CARES Act if Fannie Mae, Freddie Mac, VA, FHA, or USDA owns your loan. When entering a forbearance under the CARES Act, you don’t have to prove that you’re experiencing financial hardships. Moreover, regardless of your delinquency status, you’re still eligible to apply for forbearance even if you have already been delinquent before the Act was passed. If a private institution owns your loan, you should still contact your servicer and ask what type of relief is available for you.
The right to know all available forbearance and repayment options
If you’re eligible for the benefits under the CARES Act, you can request your servicer to pause your mortgage payments for 180 days or temporarily lower your payments. If you choose to pause your payments for 180 days, you may request your servicer to extend it for another 180 days before the end of the forbearance period. Your servicer must remind you that you can apply for other mortgage relief options.
When you request for forbearance, keep in mind that it doesn’t erase your missed payments. You need to pay it back. When discussing the repayment options, your servicer may initially ask if you can pay everything at the end of the forbearance period when your monthly mortgage payments resume. However, if you think making a lump sum payment is overwhelming, ask for other repayment options. If your financial hardship continues, ask your servicer if you can modify your loan to help you repay your mortgage based on your current income.
The right against negative credit reporting
When you request for forbearance under the CARES Act, your credit history is protected. Your servicer must protect your credit report. If your account is current during the COVID-19 national emergency, your servicer must report your account to the credit bureaus as current within the forbearance period. The same is true when you’re delinquent; your servicer must report your delinquent status before the pandemic to maintain your delinquent status. However, your servicer must report your loan as current if you bring your account current during forbearance.
The right to seek professional help
You can work with housing counselors or other professionals to help you better understand your options or help you work with your servicer. Seeking professional help is worth considering to better understand your rights and if your servicer is not cooperating in this difficult time that you want to apply for forbearance. Moreover, the CFPB and the financial regulator in your state can help you file a claim if you believe that your servicer has committed a violation in addressing your concerns as a borrower.
Foreclosure protection under the CARES Act
If you’re eligible for the benefits of the CARES Act and you’re being threatened with foreclosure, any foreclosure procedures are temporarily suspended until June 30, 2020.
In this difficult time of a coronavirus pandemic that you cannot pay your monthly mortgage, keep in mind that you’re eligible to apply for forbearance if the government or any of the GSEs owns your loan. If the CARES Act doesn’t cover your mortgage, you still need to contact your servicer to know what mortgage reliefs are available for you.