By Jim MIlano, Weiner Brodsky Kider
Late in the evening on March 25, 2020, the U.S. Senate passed H.R. 748, known as the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The bill is expected to be taken up for a vote in the House of Representatives on Friday, March 27, 2020.
This is the most important piece of legislation since Obama Care or the Dodd-Frank Act. As with all new laws and regulations, it may take a little more time to both realize its full effects and also understand how it will work in practicality. But for the residential mortgage industry, the most important piece of this legislation are the Foreclosure Moratorium provisions.
Under these provisions, a borrower with single-family loan that is federally-backed, insured or guaranteed may request forbearance regardless of delinquency status, by submitting a request to the borrowers’ servicer, and affirming that the borrower is experiencing a financial hardship during the COVID–19 emergency. The documentation for such a request is very minimal. And, while such requests appear to be focused on mortgages with monthly payments, HECMs are specifically listed in the forbearance provisions of the statute.
The forbearance period is to last up to 180 days, and can be extended for an additional 180 days at the request of the borrower. While interest continues to accrue during this period, there can be no penalties or additional fees imposed upon the borrower during the forbearance period.
Again, while this law is new, it appears such forbearance could apply to seniors under HECM tax and insurance repayment plans. We will want to confirm this and work with HUD in implementing this new law for HECM borrowers, which new law provides additional and important consumer protections for FHA borrowers beyond those in Mortgagee Letter 2020-04, which was just released by HUD on March 18, 2020.
The text of the CARES Act is available here.
(Editor’s note: Jim Milano serves as outside counsel to NRMLA)