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You Have the Right to Not Remain Silent: Regulators Offer Guide for Proactive Response for Strapped Borrowers

[Updated: Dec 11, 2020 ] May 18, 2020 by Marc Rapport
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Financially strapped homeowners and investors have two major protections right now: foreclosure moratoriums and mortgage forbearance.

And the regulators want you to know that. After launching a joint informational website last week with several other federal agencies, the Consumer Financial Protection Bureau (CFPB) paired with the Conference of State Bank Supervisors (CSBS) on a four-page "Consumer Relief Guide" that lays out in detail borrower protections and obligations under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

A forbearance right away

"You have the right to obtain a 180-day pause in paying your mortgage or temporarily lower mortgage payments if you are a borrower on a federally backed mortgage loan and affirm that you are experiencing a financial hardship due directly to indirectly to the COVID-19 emergency," the guide begins.

Further, after the 180 days of forbearance for the first request expire, the forbearance must be extended for an additional 180 days if the homeowner requests.

That coverage extends only to those mortgages that are backed by Fannie Mae, Freddie Mac, the Federal Housing Administration (FHA), the U.S. Department of Veterans Affairs (VA), and the U.S. Department of Agriculture (USDA). Links to find out who owns and services one's mortgage are included in the guide.

Millions of loans, trillions of dollars

Of course, that's trillions of dollars in loans, and millions of them already are in forbearance. The Mortgage Bankers Association put that number at about 4 million, or 7.91% of all residential mortgages, at last count.

That means troubled borrowers can try to catch up and put off further action for up to a year. Industry stakeholders already are expecting a surge in delinquencies and foreclosures sooner than that after local, state, and national moratoriums expire. Right now, such actions are in a distinct lull, although delinquencies are on the rise.

No proof needed, at least on paper

The guidance also notes that borrowers are not required to provide documentation to prove financial hardship when asking for forbearance. "And, you are eligible regardless of delinquency status, so it does not matter if you are delinquent at the time of application or were delinquent before the president's March 13, 2020, emergency declaration," the guide says.

It also restricts accrual of fees, penalties, and interest during the forbearance period and notes that "most servicers are required under federal regulations to notify you about applying for other mortgage relief options."

Borrower obligations, and no clear end in sight

The guide does note that it's up to the borrower to seek forbearance, including letting the servicer know in advance of the expiration of the first one if you intend to seek a second one.

And the deferred payments need to be made up. "At the end of your forbearance period, you and your servicer will determine how you will repay any missed payments or deficiencies related to reduced payments, especially in your escrow account," the CFPB and CSBS guide says.

That said, it notes: "The decision to request forbearance should be considered carefully; however, Congress has made the actual request process very easy."

Not so easy is seeing an end to the coronavirus crisis. Here's the presidential emergency declaration itself. It does not contain an expiration date. With a summer lull hoped for and an autumn resurgence predicted, that appears to be anyone's guess.

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