Mortgage Forbearance: COVID-19 and The CARES Act—What to Know
The whole world’s economy was hit a staggering blow when the Coronavirus pandemic (COVID-19) spread all across the world. In an effort to prevent its spread, governments everywhere have imposed strict social distancing procedures—which unfortunately hurt many businesses in the process.
The lack of sustainable cash flow during the lockdowns and quarantines has pushed many businesses to close down, ending with many losing their only source of income in this perilous time. The overwhelming problem for the average American is how to pay bills, with their mortgages and loans being at the top of their problem list.
To alleviate some of this tension, many are recommending to take on mortgage forbearance agreements.
What is mortgage forbearance?
Mortgage forbearance is when a lender allows a borrower to renegotiate payment plans. This is done by allotting a certain period of non-payment or reduced payment, followed by terms that allow a lender to regain the money “lost” during that time period. This can either be through higher monthly payments for the succeeding months or extending the mortgage completion length.
Not to be confused with refinancing, this method is much harder to get approved and is usually saved only for extreme circumstances. Utilizing this method, however, does not mean that the debt is forgiven or lessened—it is merely offset for a different date, usually due as soon as the forbearance period is over.
What does it mean under the CARES Act?
Through the Coronavirus Aid, Relief, and Economic Security (CARES) Act, however, forbearance is becoming an easier method to take grasp of. In a bid to ease the growing anxiety from the pandemic, the government has enacted a law that helps individuals and entities during this economic fallout, with forbearance being amongst that help.
Based on this Act, those who are suffering from the effects of COVID-19 can request a loan forbearance plan, for as long as they are borrowers from government-backed mortgages. This allows a borrower at least a year’s worth of forbearance, with multiple options in terms of payment once the period ends.
I have a mortgage from a private lender. Am I covered by the CARES Act for forbearance?
Unfortunately, the CARES Act forbearance is only for those with government-backed mortgages, but the widespread effect of COVID-19 has made many lenders sympathetic to the issues surrounding them. As such, many bigger lenders are likewise offering different forms of respite for their borrowers, be it through refinancing, forbearance, or even avoiding foreclosure entirely.
If you’re not covered by the CARES Act for this, then simply speak to your lender about your options. With the devastating scenario that we are all in, they may be able to offer you a way to ease the burden of your debt in the meantime.
With COVID-19 threatening everyone’s lives and safety, it might be too rattling to even think of other daily problems. Thanks to the efforts of the government and the empathy of private businesses, banks, and lenders, the burden of debt can be eschewed for the time being—allowing you to at least weather out this storm safely with your family.
Are you looking for a mortgage professional in Colorado to help you with your debt? At Move Mortgage, we provide you with the information you need to get that mortgage you’ve been eyeing. Get in touch with us today!