April 8, 2020

Forbearance on Federally Backed Mortgages

The information you obtain on this website is not, nor is it intended to be, legal advice. You should consult with an attorney for individual advice regarding your own situation.

In the Cares Act, the federal government mandated forbearance on “federally backed mortgages.”  The term federally backed mortgage is defined as a mortgage on any property (4 units or less) which is insured or guaranteed by a variety of government programs and agencies.  The Urban Institute estimates that 62% of all mortgages in the United States are federally backed in one way or another.

During the forbearance period, a borrower who is experiencing financial hardship due directly or indirectly due to the COVID-19 emergency may request the forbearance.  Borrower’s may request it through their loan servicer. The only documentation that is required is an attestation by the borrower that they are suffering financial hardship.  The forbearance period is initially 180 days but it could be extended for an additional 180 days.  So the forbearance is up to almost a year.

During the forbearance period, no late fees, penalties, or interest beyond what’s normally due is accrued.

IMPORTANTLY: Forbearance merely delays payments.  At the end of the forbearance period all the missed payments are due.  Many borrowers may assume that these payments will be added to the end of the mortgage or worked into current payments.  That doesn’t happen without a modification of the loan.

The act also puts a moratorium on foreclosures.  No mortgages on federally backed mortgages may be foreclosed on until May 17, 2020.  Also, plaintiffs in any foreclosure actions already filed may not move towards judgment, sale, or possession until May 17, 2020.