Lack of timeline to repay CARES Act mortgage relief could hurt homeowners. Borrowers are calling Chong Yi with a lot of concerns right now. Paying the bills when you’ve been laid off or furloughed is a difficult decision that many people are facing.
The CARES Act and Forbearance were initiated to offer relief to homeowners who are struggling during the stay at home government mandate. What hasn’t been clear is each lender and service provider is following different rules regarding repayment. There isn’t a universal timeline for how the lender can make you pay back that money.
What is CARES Act?
CARES Act stands for Coronavirus Aid, Relief, Economic Security Act. Here’s the bill.
Who Should Apply For Forbearance?
The CARES Act only applies to borrowers with a federally backed loan, like Frannie Mae or Freddie Mack.
Forbearance Is Not Free Money
Forbearance is an agreement to take a temporary break from paying your mortgage. This money must be paid back at some point. Legislation does not give a timeline on how this money must be paid back.
- Lump Sum as soon as forbearance period is over.
- Split up that unpaid money over a few months. This would be added to your monthly mortgage payment.
- Add it on to the end of the loan.
Legislation Needs To Be Made Clear
VA Senator Mark Warner said the intent of the legislation was to add those unpaid monthly payments onto the end of the loan. So if your mortgage was in forbearance for 3 months, if you have a 30 year mortgage it would then be 30 years + 3 months. Warner goes on to say that we need broader guidance regarding the repayment to help people get through this unprecedented period. The repayment program needs to be more universal. CARES Part 2 would address this.
How To Protect Yourself and Your Home
Chong Yi reminds borrowers to protect themselves when they’re considering forbearance.
- Make sure you call your loan service provider. Find out what their repayment program entails.
- Get something in writing. Things are changing quickly. Make sure you have an agreement in writing from your service provider.
The Bigger Picture
We’re left with more questions. What happens to those lenders who don’t have the income from your mortgage to pay their investors, what happens to the whole mortgage system?
If you have additional questions about forbearance or the CARES Act please contact Chong Yi. More about Chong Yi.