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CARES Act (COVID-19 bill): How It Affects Home Loans — Mortgage forgiveness or forbearance?

04-07-2020About MortgagesEddie Knoell

This week’s podcast was about the CARES Act that was signed into effect a couple of days ago. In this episode, we talked about how it affects mortgages and homeowners.

Because of COVID-19, our economy has taken a huge hit. The CARES Act is probably one of the quickest that has ever been passed. We did a bit of research to find out what information affects you and how this act affects you as a mortgagor.

As a disclaimer, we are by no means experts on this. We’re not CPAs, attorneys, or congressional representatives, but we hope we can provide a jumping-off point that will help you get situated.

We suggest going to the CFPB CARES Act site. Everything we talked about in this podcast came from there, we’re just laying out our thoughts in layman’s terms.

Key Takeaways

There is no forgiveness.

There is nothing in this act that is a monetary gift given to any mortgage holder. There’s nothing in it that says you don’t have to make a payment and that you’re never responsible for it again.

Nothing is free.

So, if you’re reading this and are wondering if there’s a way for you to not make a mortgage payment, the short answer is no, you will owe that mortgage payment.

But while there is no forgiveness, there is relief.

You can think of it as akin student loans where there is usually a forbearance period. You had the loans, but you didn’t start making payments on them until after you graduated.

The CARES Act is essentially trying to do this.

Essentially, starting March 18th, the law is allowing borrowers to contact their servicers and ask for a forbearance, which is basically just pushing back or delaying those payments up to 180 days. However, it should be noted that if you are not granted a forbearance, 60 days after March 18th (on May 18th) the bank can start foreclosure.

It should also be noted that this is not an automatic forbearance. You don’t automatically fall into a category where you’re not obligated to pay. You have to contact the servicer and request the ability to fall within this particular group. You have to be proactive.

We suggest making your payment until you are certain and have it in writing from your servicer that you do fall within this actual bucket.

One last thing to keep in mind is that this forbearance will still lead up to interest, you’ll still have a large payment. So, if you had trouble making those payments when they were due right now, make sure you can account for what it’s going to be like when they actually come due after the forbearance is over.

Mortgage Relief

We also talked about what to do once you’ve received are mortgage relief.

First off, make sure to keep your documentation on hand.

Another thing to note is that if you are approved for forbearance, later payments will not be reported to credit bureaus.

That being said, we don’t yet know how this is going to affect how we do mortgages. Even though you may not see a late payment if we don’t see that you’ve made payments and you come to us in a couple of months and ask for a refinance or you sell your home, if we can’t account for certain payments, we really don’t know that answer, for the time being.

Be Aware of Scams

There were three scams we covered that we suggest you be aware of.

1. Do not give people your bank or checking account info.

If someone calls you asking for this, don’t give it to them. If this happens, write their number down, get their name and their company, and do some research. And if they are who they say they are, you should be able to find their number on the web. Call them. This way you are the initiator. If you get a call from someone who says, “Yes, we’ve been helping people during the COVID-19 coronavirus crisis save their homes,” that person is probably a scammer.

2. Do not fall victim to deed scams by way of “loan modification.”

There’s nothing in the CARES Act that talks about a loan being modified.

Ten years ago, during the great recession, these were unfortunately common scams. What would happen is people would call and say, “We have a way that we help people. You do not have to make your mortgage payments. All you have to do is sign over a couple of pieces of paperwork and we’ll process it.” What they’ll probably be doing in that case, is that you’ll actually be signing is a deed transferring the ownership of your home to them.

This is often done through scammers promising modification of your loan. Again, there’s nothing in the CARES Act that talks about a loan being modified. The act does not force banks to modify.

3. There are no upfront fees.

If someone calls you and they say they charge upfront fees to solve the problem, that’s a big red flag. No one should be calling you saying we offer this awesome service and only for $599 we’ll make all these problems go away.

As we covered, the CARES Act is there to actually help you not have to make a payment.

If you have any questions about this or if you have any questions you’d like us to answer on our podcast, you can email your questions to or give us a call at (602) 535-2171. Be sure to ask us for a free quote on your next mortgage. We’ll personally work with you and help you through the whole process.


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Be sure to ask us for a free quote on your next mortgage. We’ll personally work with you and help you through the whole process.

Signature Home Loans LLC does not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only. You should consult your own tax, legal, and accounting advisors before engaging in any transaction. Signature Home Loans NMLS 1007154, NMLS #210917 and 1618695. Equal housing lender.