• DYE CULIK PC | Consumer Protection Division

Coronavirus Mortgage Forbearance Law Set to Expire Before End of Summer

The federal and state laws passed to grant loan forbearances and modifications to homeowners affected by the coronavirus are already set to expire by mid-August 2020. No additional relief is available after that time unless other legislation is enacted. This post provides a summary.

Past-due mortgages became a primary concern for homeowners when the coronavirus pandemic became widespread. With unemployment estimated as high as 25%, many homeowners have struggled to pay their bills – and especially their largest bill, their mortgage.

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Two loan modification laws were passed as a result of the pandemic. The US Congress passed the CARES Act, a law granting forbearances of up to 12 months for homeowners with certain loans owned by Fannie Mae, Freddie Mac, the FHA, and the VA. Section 4022 of the CARES Act states that any homeowner “may request forbearance on the Federally backed loan, regardless of delinquency status, by … submitting a request to the borrower’s servicer [and] affirming the borrower is experiencing a financial hardship.”

Massachusetts passed an even further reaching law permitting all homeowners to forbear mortgage payments for up to six months. A loan modification of sorts will be put in place at the end of most of these forbearances. Under the loan modification, the monthly payment will remain the same but the missed payments will be added to the end of the loan. The Massachusetts forbearance law, titled “An Act providing for a moratorium on evictions and foreclosures during the COVID-19 Emergency,” states that a bank “shall grant a forbearance … if the mortgagor submits a request … affirming that the mortgagor has experienced a financial impact from COVID-19.”

As some areas begin to relax social distancing and reopen businesses, the time to obtain a mortgage forbearance is dwindling. Under the Massachusetts law, no forbearance as will be granted after August 18, 2020. Under the federal law, foreclosures may resume after May 18, so state law kicks in and extends that to August 18 as well.

There have already been some reports of forbearances being mishandled. Our office has heard that some banks and mortgage servicers are misrepresenting whether some homeowners are eligible for forbearances. Others have granted very short forbearances, though this may be technically permitted in some circumstances. What is certain is that there will be myriad problems and, unfortunately, unnecessary foreclosures. One Massachusetts foreclosure firm recently said they expect a huge backlog of foreclosures.

Homeowners seeking a forbearance or having other mortgage difficulties should be diligent when communicating with their mortgage company. Be sure to document every call and letter, because if there is a problem later on this documentation will be necessary for any legal claims.

Culik Law has represented numerous homeowners in obtaining mortgage forbearances, loan modifications, stopping foreclosures, and dealing with other mortgage issues. We have negotiated with most major banks and lenders, and have filed lawsuits whenever necessary. If you have a question or concern about your mortgage contact us to see if we can help.

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