Know Your COVID Mortgage Forbearance Rights

Illustration for article titled Know Your COVID Mortgage Forbearance Rights

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A new CFPB report says that some mortgage lenders have failed to follow the law on mortgage forbearance during COVID. Lenders have misled borrowers about their rights, imposed unauthorized penalties, and wrongfully evicted tenants. Here’s what you need to know, and how to report an unscrupulous lender.

Know your rights as a borrower 

The CARES Act calls for a total freeze on payments through March 31, 2021 if you claim financial hardship due to COVID. Borrowers of federally-backed loans choosing to enter forbearance will be able to suspend payments, including interest or penalties, for up to 360 days from the date of the request (this does not apply to private loans, but many banks have voluntarily offered 180 days of payment relief).

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Moreover, the lawin tandem with a recent executive order from President Bidenstipulates that foreclosure and foreclosure-related eviction actions must be paused until March 31, 2021. The CARES Act also includes provisions for withholding of negative credit reporting if relief has been granted.

How to apply for forbearance

This part is easy: You simply have to ask your lender (it might be a good idea to get a written record of this or at least take notes if you’re claiming forbearance by phone). For what it’s worth, anecdotal evidence suggests lenders typically aren’t demanding proof of hardship, either.

Don’t be misled by your lender

Now that you know your rights, make sure your lender isn’t flouting the rules. Per Bankrate, examples of this include:

  • Dragging out the processing of forbearance requests. In some cases, servicers were slow to process requests for forbearance, the CFPB says. This led some borrowers to miss payments and suffer hits to their credit scores.
  • Putting borrowers in forbearance without their knowledge. In other cases, they thought they were simply perusing information about forbearance on a servicer’s website, or discussing financial struggles with representatives on the phone. Those borrowers did not understand that they had applied for, or that the servicer would process, a forbearance.
  • Errant collection notices. The CARES Act promised borrowers they wouldn’t have to worry about mortgage payments for six months to a year. However, some servicers sent notes informing borrowers in forbearance that their accounts were past due, and that they could face late fees and dings to their credit scores. These notices “may result in confusion for consumers enrolled in CARES Act forbearances,” the CFPB said.
  • Misleading statements about lump-sum payments. The CARES Act doesn’t require borrowers to pay a large sum for missed payments after forbearance ends. Instead, the borrower resumes monthly payments. However, the CFPB says, some servicers told borrowers they’d need to make lump sum payments to cover all missed monthly payments when forbearance ended.

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How to make a complaint

Start by reaching out to your lender or loan servicer directly, as they’ll be able address your concerns the fastest (especially if it’s something relatively minor that could be simply an error, like a forbearance request that’s taking too long to process).

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If that doesn’t work, or you otherwise think your lender was intentionally skirting the law laid down by the CARES Act, reach out to the Consumer Financial Protection Bureau (CFPB) by filing a complaint here. The CFPB will work on your behalf to get a resolution (most companies will respond to complaints within 15 days).

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