COVID-19 has had a profoundly negative effect on the economy and the livelihoods of many Americans. From temporary job shutdowns and permanent layoffs to missing work because you got sick or had to care for someone with the virus, there is no doubt that many of us are facing a new financial reality.
Fortunately, as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, Congress provided funding and guidance for several measures intended to offer financial and other assistance during this challenging time. In this article, we'll be going over the CARES Act mortgage provisions and what you need to know. But first, let's get back to basics.
The CARES Act was passed in late March 2020. It provided funding for economic relief related to temporary shutdowns and job losses. Among other measures, the economic provisions of the act led to the Paycheck Protection Program, expanded unemployment assistance and provided some emergency loan funding. Another widely reported provision of the act was the temporary pause on federal student loan payments.
Funding was also provided for various health care initiatives, such as a rapid vaccine development program, the support of health care workers and money and guidance to address a shortage of personal protective equipment (PPE) and other crucial items needed to deal with COVID-19 and similar situations.
A section of the act called for lenders to provide mortgage forbearance relief. Although many pandemic-related laws expired with the declaration of the end of the national emergency in April 2023 – including the mortgage forbearance provisions – some homeowners are still finishing their COVID-19 hardship forbearances. Let's take a look at this mortgage assistance and how it worked.
Mortgage forbearance temporarily pauses or reduces mortgage payments, providing relief to homeowners who are struggling financially for whatever reason. It’s a short-term solution. And by the end of the forbearance period, homeowners must catch up on their missed or reduced payments.
As part of the CARES Act, Congress gave homeowners impacted by COVID-19 the option to request up to a year of mortgage payment forbearance. Rocket Mortgage ® approved initial forbearances for 3 months, with a client option to extend forbearance every 3 months for up to a year. Depending on a client’s circumstances, they might have qualified for additional months of forbearance beyond what the CARES Act provided.
To request a COVID-19 forbearance under the CARES Act, you had to tell your mortgage servicer – the entity you make your monthly mortgage payment to – that you suffered a financial hardship caused directly or indirectly by the virus. Servicers also manage and administer your escrow account for taxes and insurance if you have one. Rocket Mortgage continued to pay homeowners’ taxes and insurance during forbearance if they had an escrow account with us.
It's important to note that payments paused during forbearance aren't forgiven and must be repaid. Depending on their forbearance period or extensions, some homeowners may still be finishing up their COVID-19 forbearance. When you're ready to exit your forbearance or when it ends, check in with your mortgage servicer for guidance on the next steps.
Rocket Mortgage clients still on COVID-19 forbearances may finish out the remainder of their time on the plan without any negative credit impact. However, the amount of time you have left in forbearance depends on your lender’s policies and how long you've been in forbearance.
If you want to refinance or purchase soon after, requesting forbearance can impact your ability to qualify. In this case, it would be best to continue making payments if you can afford it.
Once your forbearance is over, you must repay those missed payments. Your mortgage servicer will work with you to determine which programs are available to help you get back on track. Here are some program options:
If you have any questions, make sure you're communicating with your servicer.