The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) contains a variety of provisions designed to help people who are in financial distress due to COVID-19.

Specifically, for federally backed residential mortgage loans, the CARES Act:

contains a foreclosure moratorium stopping new cases, motions for judgments and orders in pending cases, and evictions and sales for at least 60 days (until May 18, 2020); and
allows borrowers to request a forbearance for up to 180 days (or longer) if they are experiencing a financial hardship due to COVID-19.

These provisions do not apply to conventional mortgage loans. If you have a conventional loan, your lender or servicer may be offering similar options.

Although the CARES Act forbids additional interest, fees, and penalties from accruing during the forbearance period, your regular monthly principal and interest payments that otherwise would be due under the original contract terms will continue to accrue on your account. In other words, your regular payments are not forgiven.

Mortgage lenders and servicers—for both federally-backed and conventional loans—have been offering borrowers either a forbearance of payments or a deferment of payments. Although both options allow you to “skip” payments, they are not the same. The difference is what happens at the end of the temporary forbearance or deferment period.

At the end of a typical forbearance period, the missed payments will be due in a lump-sum. Instead of a one-time “balloon payment,” lenders may work with borrowers to develop a payment plan, which may result in your future payments being higher than previous monthly payments.

At the end of a typical deferment period, the missed payments can either be repaid over time or added to the end of the loan period, depending on what the lender offers or allows.

If you are experiencing a financial hardship due to COVID-19, our best advice is to

make as much of your regular monthly payments as you can right now and
be careful and understand exactly what is being offered before agreeing to either a forbearance or a deferment with your lender.

If you are a victim of the financial damage being caused by COVID-19, then we may be able to help. Call us to schedule a free initial consultation to discuss your financial situation and your options.

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