The CARES Act is set to expire on March 27, 2021.  The CARES ACT provided relief to those suffering economic hardship due to Covid-19, by allowing a borrower to skip mortgage payments on federally backed mortgages and preventing those lenders from filing foreclosure.  Many borrowers have taken advantage of this by entering into forbearances on their mortgage payments.  If you have a need and have not requested a mortgage forbearance yet, many mortgage providers have a deadline to do so of February 28, 2021.  Do not delay.

Initially, my fear was that those borrowers would be required to pay back the missed payments in a lump sum.  However, later versions of the CARES ACT provide that mortgage lenders can not require you to pay the skipped payments in a lump sum.  This is a relief for many people that were worried about how they would catch up on their mortgage.  While this does not take all the mystery out of what will happen with the missed payments, it does provide some reassurance.  The options that many lenders have advised borrowers of include junior mortgages, adding missed payments to the end, repayment over time, and mortgage modifications. 

There is still some uncertainty of how lenders will require repayment of escrow deficiencies when the missed payments included payments for property tax and homeowner's insurance.  Typically, lenders provide an escrow analysis each year and any deficiency must be paid by increasing the monthly payments to make up the difference in a set period of time.  This could result in a significant increase if a borrower took advantage of the forbearance for a full year.

If you took advantage of a mortgage forbearance, you should communicate with your lender as soon as possible regarding options for the missed payments.  If you find yourself in a situation where you are unable to work out options to repay the missed payments, Chapter 13 Bankruptcy may be an option to help you catch up or modify your mortgage.  Look for my next blog that talks about options for mortgage arrears in bankruptcy.

Laurie Blanton, Esq.