The Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, was designed to help Americans economically impacted by the coronavirus pandemic and to help homeowners avoid home foreclosure.
Along with the CARES Act, the VA’s Loan Guaranty Service is focused on ensuring veterans and their families facing temporary or more long-term difficulty paying their monthly mortgage understand their options.
How does this law affect my VA home loan?
If you experience financial hardship caused directly or indirectly by COVID-19, you should immediately contact your loan servicer. If you do lose income, you always have options to avoid foreclosure on your VA home loan. Your options include forbearance extension under the CARES Act.
The CARES Act allows borrowers with government-backed loans (including VA loans) to request special forbearance—an agreement between you and your mortgage servicer—where your servicer agrees to either delay payments or to accept partial payments for one or more months. The details of any forbearance agreement are between you and your servicer, which means you don’t have to call VA for permission. The Consumer Financial Protection Bureau (CFPB) has a video summarizing the mortgage forbearance changes.
- You can request a forbearance for up to 180 days without paying late fees or other penalties by simply stating you are affected financially by COVID-19.
- If necessary, you can request up to 180 additional days of forbearance before the first forbearance period ends.
- Your servicer cannot report delinquency if you take advantage of relief related to COVID-19 throughout the current emergency and 120 days afterward.
What does ‘up to 180 days’ mean?
Not all borrowers need 180 days. Your financial situation and ability to repay after the forbearance ends will help determine the length and terms of your forbearance agreement.
What do you need to know about forbearance?
It’s important to understand that all delayed payments covered in a forbearance period are still owed. For example:
Your monthly mortgage payment is $1,100 and you request a forbearance for three months. After the three-month forbearance, you’ll owe your mortgage servicer the $3,300 of missed payments in addition to resuming your monthly mortgage payment of $1,100.
Your servicer will try to help you reach affordability, so you must be honest about your income, savings and expenses. VA encourages you to be realistic about what you can afford and how much time you will need. If you attempt to overreport your income to keep your home, you could face an insurmountable debt and raise your risk of foreclosure. Your servicer does not have to accept partial payments unless that was part of the agreement. If you underreport your expected income to try to save money, your servicer may determine that you can’t afford your loan and may raise your risk of foreclosure.
When are my missed payments due?
This depends on your forbearance agreement. Your repayment plan could be that you make the payments all at once, if you are financially able, or spread payments out over an agreed-upon time period.
What if I can’t afford the higher monthly payments?
In this case, VA allows loan modifications. This can offset the size of your monthly payments by extending your loan out beyond your 360-month (30-year) loan, as long as your loan does not exceed 480 months from origination date. Instead of 30 years, your loan term could be 30 years plus 1 month or up to 40 years.
Keep in mind, your mortgage note is a legal document that specifically states the date of first payment. Those payments are due on the first of each month. A VA loan can be repaid early without penalty, but your mortgage note must be legally modified to adjust any of the terms mentioned above.
What if I don’t have a government-backed home loan?
- All homeowners can use the Consumer Financial Protection Bureau’s (CFPB) “Find a Housing Counselor” tool to find counseling agencies approved by the Department of Housing and Urban Development (HUD) in your area.
- You can also call the HOPE™ Hotline, open 24 hours a day, seven days a week, at (888) 995-HOPE (4673).
- If your loan is owned by Fannie Mae or Freddie Mac, other programs may be available. As a homeowner, you can find out if your loan is owned by Fannie Mae by going to knowyouroptions.com/covid19assistance and by Freddie Mac by going to myhome.freddiemac.com/getting-help/
Visit the VA home loan CARES Act webpage for more information. If you experience any issues with your home loan, you can call a VA Regional Loan Center at 1-877-827-3702. We may have additional call volume, so please be patient with us. Stay safe and remember VA is here to serve you.