Effective April 1 for borrowers with a financial hardship that makes them unable to pay their mortgage due to the outbreak, mortgage servicers must extend deferred or reduced mortgage payment options -- called forbearance -- for up to six months, and must provide an additional six months of forbearance if requested by the borrower. This mandate implements provisions contained in the landmark Coronavirus Aid, Relief, and Economic Security Act (CARES Act) which President Trump signed into law on March 27.
"The last thing any of us wants is for Americans to lose their homes unnecessarily while we continue to fight this invisible enemy," said HUD Secretary Ben Carson. "If you're struggling, immediate help is now available. The FHA will continue to work with stakeholders to ensure that the loss mitigation options that are offered for both forward and reverse borrowers are appropriately tailored for the present situation.
In addition to special COVID-19 forbearance, FHA also implemented the COVID-19 National Emergency Partial Claim, an option to be used by servicers when the coronavirus forbearance period ends. This partial claim will help eligible home owners who have been granted special COVID-19 National Emergency forbearance to reinstate their loans by authorizing servicers to advance funds on behalf of home owners. The partial claim will defer the repayment of those advances through an interest-free subordinate mortgage that the borrower does not have to pay off until their first mortgage is paid off.
FHA has also instructed mortgage servicers to:
- Delay submitting due and payable requests for Home Equity Conversion Mortgages by six months, with an additional six-month delay available with HUD approval; and
- Extend any flexibility they may have under the Fair Credit Reporting Act relative to negative credit reporting actions.
Borrowers who are not currently impacted and able to make their monthly mortgage payments should continue doing so. However, those who are experiencing financial hardship as a result of the COVID-19 pandemic should immediately contact their mortgage servicer -- the entity to which they make their monthly mortgage payments -- to discuss forbearance or other options that may be available to them. Borrowers who are not experiencing an income reduction due to COVID-19 are asked to avoid contacting their mortgage servicer about these options, as these questions will divert resources from serving those truly in need.