Mortgage Forbearance and the CARES Act
The coronavirus pandemic has led to an economic crisis. On March 24, the Federal Reserve Bank of St. Louis predicted that unemployment in the United States will skyrocket to 32%, a point higher than the unemployment peak of the Great Depression, during which the highest rate of unemployment was 24.9%.
Income loss due to the coronavirus means that many people can’t afford to make payments on their mortgages. By April 2, 10 million new jobless claims were filed. The Coronavirus Aid, Relief, and Economic Support (CARES) Act looks to relieve the unprecedented economic stress placed on individuals by giving people the right to mortgage forbearance.
What Borrowers Can Do
The CARES Act gives individuals with a federally backed residential mortgage loan the right to forbearance if they are experiencing financial hardship due to COVID-19. In order to receive forbearance, borrowers must contact lenders.
The forbearance lasts for 180 days, and those experiencing hardship can request an extension on their forbearance for an additional 180 days. During the forbearance, borrowers cannot be accrue extra fees, penalties, or interest. As of now, borrowers will still have to figure out how to pay their accrued mortgage payments after the forbearance period.
The forbearance gives people a moment of relief in the midst of the economic crisis, but it does not mean that the economic troubles created during the pandemic shrink or go away.
How Many Households Qualify?
Because of the CARES Act, approximately 15 million households in the United States, or 30% of U.S. citizens with home loans, could stop paying their mortgages and opt for forbearance if the economy is still in a state of crisis through the summer and beyond. Currently, Bank of America has already allowed 50,000 customers to defer their mortgage payments, including loans that are not federally backed and covered by the CARES Act.
If You Need Help
Navigating these times can be stressful and hard. Del Rey Urban has helped people succeed through the past 3 recessions. Whether you have a struggling business or are having trouble paying your mortgage – we are in this together. Please email us today if you are in need of help with your mortgage or any other business related matters due to the Coronavirus pandemic.