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To Skip or Not Skip Mortgage Payments:
Uncertainty in the CARES Act
(The following is for informational purposes only. It is not legal advice. If you want to discuss your case, please make an appointment with me at 561-214-6163 or email me at Malcolm@MEHRealProperty.com)
I’m writing to warn you that there may be some hidden traps when you ask your lender to let you skip mortgage payments because of the corona virus crisis.
The new Cares Act offers mortgage aid to those with a government-backed mortgage during the corona virus crisis. That means that if you have an FHA-loan, a loan backed by Fannie Mae or Freddie Mac, a Veterans Affairs loan, or a loan backed by the Agricultural department you qualify for help.
So what do you get if you qualify? Help comes in the form of 180-day forbearance on your mortgage payment with an extension of another 180-days if requested. After you declare to your bank that you have been impacted by COVID-19 medically or financially, the CARES Act requires your bank to automatically grant you a stay of payments – no documentation required.
Here is where things get tricky. While the law clearly declares that your mortgage company cannot charge additional fees or charges for the forbearance, there is no exact mention of the terms of assistance being granted. I have some open questions about those missed payments.
- Will you be forced to make a lump sum payment at the end of the forbearance period for all the missed payments?
- Will your bank take mercy on you and just put the payments missed to the back of the loan, to be paid when the loan is about to end?
- Or, will you be forced to take out a separate loan and make payments over time, which will most likely only make matters worse?
Sadly, there are no clear answers to any of this. The CARES Act was written so quickly in the middle of the corona virus crisis that the government didn’t think it all the way through.
If you can’t make mortgage payments and decide to ask for help, make sure that you discuss with your bank ahead of time how they plan for you to become current after the forbearance period. Get all the facts so that you know what you are facing after the crisis is over!!
If the government comes out with some clearer guidance, we will let you know
Stay safe. Stay healthy.
The Law Office of Malcolm E. Harrison