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What You Should Know About the CARES Act

Included in the $2 trillion stimulus bill that was just passed is the CARES Act. Here are the protections that it offers homeowners, investors, and tenants.

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To support the economy during the COVID-19 epidemic, the government recently signed into law a $2 trillion, 880-page stimulus bill. Included in the bill are built-in housing protections for single-family homeowners, multi-family homeowners, renters as well as future homebuyer credit protections.

Here are some of the highlights:

Mortgage Forbearance and Foreclosure Protections

During this designated disaster period — which began on March 13 — a borrower with a federally backed loan can request forbearance through the loan servicer. A federally-backed loan means that it’s either guaranteed or insured by the Federal Housing Administration, Department of Veteran Affairs, Department of Agriculture, or purchased or securitized by Fannie Mae or Freddie Mac.

Once the request is submitted, forbearance is granted for a period of up to 180 days at the request of the borrower. No fees, penalties, or interest beyond the amount scheduled can be accrued on the borrower’s account.

The servicer cannot request any proof beyond the borrower’s attestation to a financial hardship caused by COVID-19. The servicer of any federally backed loan also cannot initiate the foreclosure process for no less than 60 days beginning on March 18.

What if your mortgage is not federally backed? We’ve seen success when homeowners negotiate directly with lenders. Some of the most common restructures involve three months of payment forgiveness and either one extra payment added over the next three years or three months of payments added at the end of the loan term.


Protections for Multi-Family Property Owners

During the covered period, all of the protections extended to homeowners are being extended to owners of multi-family properties with federally-backed loans as well. The loans are aimed at providing relief to the building owners that may be facing hardships — possibly due to the inability of tenants to pay.

Unlike single-family homeowners, in this instance, multi-family building owners need to document the financial hardship they are facing and can request forbearance for up to 30 days. That forbearance can be extended for two additional 30-day periods.

Renter protections are built into this section of the bill, guaranteeing that the building owner receiving forbearance cannot evict or initiate eviction of tenants based on nonpayment of rent or charge any late fees to tenants due to late payment of rent.


Increased Tenant Protections

For the next 120 days, the owners of any dwelling that participate in any housing program covered by various acts — including the low-income housing tax credit program, National Housing Act, Homeless Assistance Act, National Affordable Housing Act, rural housing voucher program and others — cannot begin any action to initiate eviction proceedings to re-take possession of a dwelling for nonpayment of rent or charge any fees or penalties related to nonpayment of rent.

The protections also apply to tenants of any building that’s owned by a lessor with a federally-backed mortgage, including through the U.S. Department of Housing and Urban Development.


Credit protections

The stimulus package amends the Fair Credit and Reporting Act to allow more leeway for consumers that come to agreements with lenders on deferring, making partial payments, modifying a loan, forbearing delinquent amounts, and utilizing any other relief. It’s a measure designed to not allow the tanking of credit scores of millions of Americans suddenly finding themselves out of work due to the coronavirus.

If the lender and a consumer impacted by the coronavirus come to an agreement on any of the aforementioned accommodations — concerning one or more payments — and the consumer makes either the agreed-upon payment or is not required to make the payment, then the account must be reported to credit agencies as current.

If the account was delinquent before the noted period, that status must be maintained.

We hope you found this summary valuable. If you need COVID-19 medical resources, supplies, food delivery, or just a few guided meditations to relax, check out:

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