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Message from the Director – The end of CARES Act Forbearance – What to do Next

The primary goal of the Office of the Comptroller of the Currency’s (OCC) Customer Assistance Group (CAG) is to process and resolve consumer complaints that fall under our jurisdiction. While CAG seeks to resolve complaints in an objective and expeditious manner, not all consumer issues are covered by banking laws or regulations and not all consumers will obtain the resolution they are seeking.

The CARES Act (“CARES”) was signed into law on March 27, 2020. CARES provides a borrower, with a federally backed mortgage loan experiencing financial hardship due to the COVID-19 emergency, the ability to request a forbearance of up to 12 months of payments if the request is made prior to the end of the declared national emergency. The President first declared a national emergency on March 13, 2020 and it was extended on February 24, 2021. It is estimated that the national emergency should end around March 1, 2022, unless it is further extended.

Federally backed mortgage loans are loans that are insured or guaranteed by the Federal Home Loan Mortgage Corporation (Freddie Mac), or Federal National Mortgage Association (Fannie Mae), Federal Housing Administration/U.S. Department of Housing and Urban Development, U.S. Department of Agriculture, or Veterans’ Administration. For more information on how you can tell who owns your mortgage, consider reviewing this information on the Consumer Financial Protection Bureau’s website: How can I tell who owns my mortgage?

If a borrower remains in forbearance at the end of the national emergency and has a federally backed loan, there are four general options that may be available to repay the forbearance amount and bring the loan current:

  1. Repayment Plan over a longer period of time – Under this option, a portion of the past due amount is added to the regular monthly payment until the forbearance is paid in full. This will result in a higher monthly payment for a specified period of time.
  2. Payment Deferment – Under this option, the mortgage payment will remain the same, excluding changes to the escrow account. No fees are charged in connection with the deferment, and the servicer waives late fees and penalty fees upon acceptance of this option. The unpaid forbearance amounts are repaid at the end of the loan term or when the property is refinanced/sold. No interest is charged on the deferred amount.
  3. Loan Modification – Under this option, there are no additional fees associated with these types of repayment assistance.
    • Streamline modification – A modification without full documentation if the terms are favorable to the borrower (no additional fees, no term longer than 40 years, no interest accrual on deferred amounts, ends the pre-existing delinquency, and requires payment that is less than or equal to pre-modification payment amounts, excluding escrow).
    • Traditional modification –A modification that fully documents the borrower’s ability to repay under the modified terms and follows the requirements of the agency insuring or guaranteeing the loan. A modification may include adding past due amounts to the loan amount owed, lowering the interest rate, extending the loan maturity date, and re-amortizing the total amount owed.
    • Modification with Partial Claim – The partial claim defers the repayment of mortgage principal through an interest-free subordinate mortgage that is not due until the first mortgage is paid off. This option may be available to borrowers with loans insured by the Federal Housing Administration/U.S. Department of Housing and Urban Development or Veterans’ Administration.
  4. Repayment with lump sum (reinstatement) – At the end of the forbearance period, the borrower remits the regular payment and all payments deferred under the forbearance period.

If the borrower’s loan is not a federally backed mortgage, the borrower should contact his/her servicer to determine if similar options are available.  Servicers will contact the borrowers about 30 days before the end of the forbearance plan and borrowers should work with their servicer to determine which options are available based on the borrower’s specific circumstances. You may also want to consider contacting the HOPE for Homeowners hotline at 1.888.995.4673 to speak with a housing counselor.  The counselors affiliated with HOPE are all HUD certified.

January 2022