Impact of the CARES Act Mortgage Forbearance Rules and Loan Modifications

Impact of the CARES Act Mortgage Forbearance Rules and Loan Modifications

The CARES Act was passed in March 2020 not long after the COVID-19 pandemic exploded in the United States. It’s a $2.2 trillion economic stimulus package that Congress passed and then-President Donald Trump signed to provide economic relief to people all around the country who were struggling financially.

There were many provisions in the CARES Act, including direct economic stimulus payments to individuals, grants and tax incentives for businesses and more. 

One of the most popular programs available under the CARES Act was mortgage forbearance. This was available to millions of people who had loans that were backed by different federal agencies.

Below, we dive deeper into CARES Act mortgage forbearance rules and loan modifications as they still apply today, four years after the law was passed.


Loans covered under the CARES Act

Loans eligible for mortgage forbearance under the CARES Act are those backed by different federal government agencies and GSEs, or government-sponsored enterprises. 

These include some of the most popular loan programs in the country, such as those:

  • Insured by the Federal Housing Administration (FHA)
  • Administered by the Department of Housing and Urban Development (HUD)
  • Insured or guaranteed by the Department of Veterans Affairs (VA)
  • Insured, guaranteed or made by the Department of Agriculture (USDA)
  • Securitized or purchased by the Federal National Mortgage Association (Fannie Mac) or Federal Home Loan Mortgage Corp. (Freddie Mac)
  • Guaranteed under certain sections of the House and Community Development Act of 1992 that target Hawaiian and American Indian families

These loans could be eligible if they are held by individuals or even some commercial owners and landlords, though the rules for forbearance are different for each type of borrower.


Mortgage forbearance

Mortgage forbearance is a process that provides financial relief to those who qualify under the CARES Act. It’s a way that you can pause monthly repayments on your mortgage so that you can have that extra cashflow to pay for other essentials. This is available to those who experienced financial hardship related to the COVID-19 pandemic.

Covered forbearance period

The initial forbearance period was 18 months if Freddie Mac or Fannie Mae backed your mortgage. To be eligible for those 18 months, though, you had to be in an active forbearance plan by September 30, 2021. The maximum extension period of forbearance after that is 12 months.

Other federal mortgages were also available for a forbearance period of 18 months, but again, only if you were in an active plan as of September 30, 2021. Otherwise, the forbearance period is 12 months.

During the forbearance period, the loan servicer is banned from charging interest, fees or penalties. They also can’t report you to a credit bureau for a missed or late payment, as long as you’re officially in one of the CARES Act forbearance programs.

Options for repaying after your mortgage forbearance ends

When your mortgage forbearance ends, you will be required to resume your monthly repayments as they were before the forbearance began. If you can continue to make those payments, then simply do so to get started again.

However, if you are having trouble working that back into your budget — or if you are still experiencing financial hardship — there are options that you have at your disposal.

Repayment options vary by agency

An important thing to note is that your repayment options following mortgage forbearance depends on the agency that backs your loan. This is why you’ll need to reach out to your loan servicer immediately if you are having trouble repaying your loan once the forbearance period ends.

Some options might include reducing the amount of your repayments or modifying your loan in some other way to provide you with financial relief.

Steps to request forbearance under the CARES Act

To request forbearance under the CARES Act, you must directly contact your loan servicer, which is the company you make your payments to. The servicer will require you to submit certain documentation to prove the reason you need the forbearance, though it’s not extensive.

In most cases, a simple phone call will suffice to get the process started. You may have to follow up and submit documents via email or mail, though.

Mortgage forbearance end dates

The mortgage forbearance periods under the CARES Act have all ended. The Biden administration, in conjunction with the Consumer Financial Protection Bureau, have passed some rules that were meant to prevent a huge number of foreclosures happening once the periods ended. 

Additional Resources on CARES Act Forbearance

Some of the additional resources that the Biden administration has passed include allowing borrowers to resume their mortgage payments and have their missed payments applied to the end of the total mortgage. They might also be able to reduce their monthly payments through a streamlined loan modification.

Borrowers also may have the option to sell their homes to get out of a mortgage they can no longer afford. Again, though, keep in mind that what is available to you will depend on your individual situation and your specific loan.

Penalties that accompany a CARES forbearance request

As mentioned before, your mortgage servicer cannot charge any penalties, interest or fees during the forbearance period, and you cannot be charged any penalties for applying, either. Late fees, penalties and accrued interest can resume once the forbearance period ends, though.

Loan modification and the CARES Act

While the CARES Act itself didn’t provide any official loan modification programs, it did require the lender to offer loss mitigation options to determine the borrower’s feasibility to modify the loan and other related options once your forbearance period ends. Those are described in more detail below.

Refinancing FHA loans after forbearance with your mortgage servicer

One common way that you could gain some financial relief after forbearance is by refinancing your FHA loan. Depending on your situation — including your credit score, how much equity you have in your home and what interest rate you qualify for — refinancing could result in a lower monthly mortgage payment.

A refinance will result in you basically replacing your current mortgage with a new one that has better financial terms. You’ll need to reach out directly to your mortgage servicer to initiate and apply for a refinance.

Refinancing VA loans after forbearance

If you have a VA loan, you will have two options to refinance. The first is called a VA streamline, or a VA IRRRL, or a cash-out refinance. 

The VA IRRRL could be an option if you already have a VA mortgage, want to save money on your monthly payment but don’t want to take any cash from the equity you might have in your home. If you wish to take equity out of your home through a refinance, you’ll have to turn to the cash-out refinance option.

Next steps after mortgage forbearance (including your mortgage payments)

Once your mortgage forbearance period resumes, you’ll be required to resume your monthly payments as they were set before the period began. If you find that you are having trouble making those repayments, it’s important to reach out to your loan servicer immediately to see which options you might have at your disposal.



How will forbearance impact my credit?

Loan servicers were barred from reporting you to a credit agency for missed payments during forbearance periods under the CARES Act.

What happens if your CARES forbearance plan extension is about to expire?

It’s important to reach out to your loan servicer if your CARES forbearance plan extension is about to expire. They will be the ones that could help you with any further financial assistance or other options available.

How do you request a mortgage forbearance extension?

You will have to contact your loan servicer to request a mortgage forbearance extension. They will be the ones to decide whether or not to offer you an extension, based on a number of factors.

Can you exit your CARES forbearance plan early?

Yes. You can request to end your forbearance period early and to be qualified for a repayment option at any time.