CARES Act and What It Means For Your VA Loan
Key Points for CARES Act and Your VA Loan
The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law by President Trump on March 27, 2020. Its purpose is to address the effect of the COVID-19 pandemic on the U.S. economy by “providing fast and direct economic assistance for American workers and families.” For most Americans, that has resulted in the receival of stimulus checks, additional unemployment payments, an extension to file taxes, and insurance coverage of virus-related treatments, to name a few. But for service members and veterans with a VA home loan, there are some additional benefits the CARES Act provides.
Provisions within the CARES Act give VA (and other government-backed) loan borrowers the ability to request a special forbearance. If you are paying your mortgage with a VA loan, you are eligible to request either a delay in payments or the ability to pay only partial payments for a specified period of time. This specialized agreement is made between you and your loan servicer, not the VA, and can differ from person to person.
The key points for borrowers with VA/federal-issued loans:
- You have the right to request a forbearance for up to 180 days.
- You have the right to request an extension of up to an additional 180 days before your first forbearance ends.
- You MUST contact your loan servicer to request this – it does not apply automatically.
- There are no additional fees, penalties, or interest added to your account, but regular interest will still accrue.
- If approved and utilizing the CARES Act borrower relief, your lender cannot report you delinquent during the pandemic or for up to 120 days after.
- You won’t need to submit additional documentation to qualify, but you will need to signify that this request is due to a COVID-related hardship
If you are struggling to make ends meet, this is an option that can provide you some relief.
For a visual summary, check out this video by Consumer Financial Protection Bureau.
A few additional points to keep in mind:
- When you call, it’s possible you may be met with longer-than-normal wait times. There are many people in similar circumstances, and due to the virus impacting working numbers, your servicer could be under-staffed.
- If you can keep up with your payments, you should continue doing so. Underreporting your income has the potential to result in foreclosure if a servicer determines you can’t afford your loan. Forbearance is not something to take advantage of simply because you don’t want to pay right now.
- Putting your loan in forbearance does not change how much you owe. Make sure you ask how you are expected to pay back the amount owed once your ‘pause’ is lifted.
- Entire unpaid amount in one lump sum immediately after the forbearance period ends?
- Entire unpaid amount in one lump sum at the end of the loan term?
- Will loan term be extended and missed payments added to the end of the mortgage?
- Once un-paused, will monthly payments be higher for a specified period of time to make up missed amounts? In the case of VA loans, if you cannot afford higher monthly payments, you can request a loan modification. There are specific regulations with this, which you can read here or by reaching out to your lender.
- Watch out for scams – always make sure you are dealing directly with your mortgage lender and not someone posing as them.
As with any situations of financial hardship, if you’re experiencing any difficulty in making your payments – even those not related to COVID-19 – you should always reach out to your lender right away.
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