CARES Act Explained: How to save your home from Alabama foreclosure
The CARES Act is an amazingly powerful law that can help you stop an Alabama foreclosure. This law was recently passed to help deal with the COVID-19 pandemic. Its a huge law but the part we will focus on is what this law says about stopping foreclosures by getting a forbearance.
A forbearance means you don’t have to make payments for a period of months which is a benefit. This can be up to 6 months or even 12 months. But the real benefit is stopping a foreclosure if you qualify for the CARES Act forbearance.
Let’s take a look at this law and how it can help you.
Here’s what we will cover:
- What type of loans gets the benefit of the CARES Act? (Federally backed mortgages and how to figure out if this is what your loan is)
- The exact benefit you can receive from this powerful law. (Forbearance which means no foreclosure!)
- The exact steps to take to get a forbearance for your home loan. (And how to not get cheated by your mortgage company)
- What happens after you get a forbearance. (And how to not be tricked by your mortgage company)
So if you are ready to discover how to use the CARES Act, let’s get started right now!
What type of loans qualifies for protection under the CARES Act?
Section 4022 of the CARES Act is what we are focusing on.
It defines the loans that qualify as follows:
(2) Federally backed mortgage loan.— The term “Federally backed mortgage loan” includes any loan which is secured by a first or subordinate lien on residential real property (including individual units of condominiums and cooperatives) designed principally for the occupancy of from 1- to 4- families that is—
(A) insured by the Federal Housing Administration under title II of the National Housing Act (12 U.S.C. 1707 et seq.);
(B) insured under section 255 of the National Housing Act (12 U.S.C. 1715z-20);
(C) guaranteed under section 184 or 184A of the Housing and Community Development Act of 1992 (12 U.S.C. 1715z-13a, 1715z-13b);
(D) guaranteed or insured by the Department of Veterans Affairs;
(E) guaranteed or insured by the Department of Agriculture;
(F) made by the Department of Agriculture; or
(G) purchased or securitized by the Federal Home Loan Mortgage Corporation or the Federal National Mortgage Association.
So what does this mean you?
It means if you have a loan on a residential property that is:
- FHA (Federal Housing Administration)
- VA (Veterans Affairs)
- USDA (US Department of Agriculture)
- Freddie Mac (Federal Home Loan Mortgage Corporation)
- Fannie Mae (Federal National Mortgage Association)
Then you qualify under this law.
How do you figure out if your loan is one of the five listed above (federally backed loan)?
You may just know it — if you took out a VA loan or USDA loan you probably remember this.
You can also look at your loan documents (note and mortgage) and that may tell you.
To tell if you have a Fannie Mae (Federal National Mortgage Association) loan, you can use the free lookup tool here. You put in your information and it will tell you if you have a Fannie Mae loan — you can also watch this video which shows you the lookup tool.
You can also call your mortgage servicer and ask them if you have one of these loans — you may also be able to do a chat on your mortgage company’s website.
Finally, you can send a letter to the address for Request for Information or Notice of Error letters and ask your mortgage company. This does take longer so its best to call or do a chat with your mortgage company to find out the answer ASAP.
[Note: if your loan is NOT a federally backed mortgage, you can read this article which discusses ways outside of the CARES Act to stop a foreclosure in Alabama.]
OK, now that you know you have a federally backed loan that is covered by the CARES Act, let’s see what that gets you.
What wonderful benefit do you get from the CARES Act that will stop a foreclosure in Alabama?
You can get a forbearance which means the foreclosure will not happen. So let’s look at what the law actually says:
(1) In general.— During the covered period, a borrower with a Federally backed mortgage loan experiencing a financial hardship due, directly or indirectly, to the COVID-19 emergency may request forbearance on the Federally backed mortgage loan, regardless of delinquency status, by—
(A) submitting a request to the borrower’s servicer; and
(B) affirming that the borrower is experiencing a financial hardship during the COVID-19 emergency.
(2) Duration of forbearance.— Upon a request by a borrower for forbearance under paragraph (1), such forbearance shall be granted for up to 180 days, and shall be extended for an additional period of up to 180 days at the request of the borrower, provided that, at the borrower’s request, either the initial or extended period of forbearance may be shortened.
What does this mean for you?
As long as you have a federally backed loan (see above), then you simply submit a request to your mortgage company and tell them that you are experiencing a financial hardship during the COVID-19 emergency. With a forbearance, no payments are due. If no payments are due, then the foreclosure cannot proceed.
The exact steps to take to get a forbearance for your home loan under the CARES Act.
Let’s see what the law tells your mortgage servicer to do and then we’ll discuss it:
(c) Requirements for Servicers.—
(1) In general.— Upon receiving a request for forbearance from a borrower under subsection (b), the servicer shall with no additional documentation required other than the borrower’s attestation to a financial hardship caused by the COVID-19 emergency and with no fees, penalties, or interest (beyond the amounts scheduled or calculated as if the borrower made all contractual payments on time and in full under the terms of the mortgage contract) charged to the borrower in connection with the forbearance, provide the forbearance for up to 180 days, which may be extended for an additional period of up to 180 days at the request of the borrower, provided that, the borrower’s request for an extension is made during the covered period, and, at the borrower’s request, either the initial or extended period of forbearance may be shortened.
So what does this mean?
First, you simply tell your mortgage company you need a forbearance due to the coronavirus pandemic. Obviously you have to be truthful but the truth is almost everyone has been impacted by this.
Second, you do NOT have to provide any documentation. So you do not need to show a job loss or anything else — it is simply you telling your mortgage company you need help. The language in the statute is “the borrower’s attestation to a financial hardship” from the COVID-19. And the law says “the servicer shall with no additional documentation required” so that means what it says. Don’t let them lie to you — if they do lie or claim you can’t get this without filling out paperwork, document this carefully and then let’s talk because likely you need to sue your mortgage company.
Finally, the effect of this is there can be no additional charges — the servicer has to act like you made your payments in terms of no penalties or fees. Now certainly you will at some point have to pay those missing months but this will stop the foreclosure now.
What happens after you get a forbearance — what are the next steps you need to take?
First, you need to make sure the foreclosure gets canceled. Alabama foreclosures are “non-judicial” which means no judge is involved. So you must verify with your mortgage company the foreclosure has been canceled and confirm with the foreclosure lawyers that they are not going forward with the foreclosure.
Second, you want to make sure there is no false credit reporting about a foreclosure since there is no foreclosure.
Third, understand you eventually must pay back the “missed” payments during the time of the forbearance. This does not necessarily have to be all at once when your forbearance ends. But in some form or fashion (usually a loan modification), the missed payments will have to be made up. So don’t get used to not making a payment — I recommend setting aside as much as you can or paying off other debt so you can handle your mortgage payment again after the forbearance. You should also reach out in writing to your mortgage company to ask about your options.
Fourth, understand and make sure the amount you supposedly owe is correct so you’ll know exactly what you need to pay once you get back to making payments.
If your mortgage company starts playing games or adding in fees and expenses, let’s talk as you may need to sue your mortgage company for money damages.
So, what should you do right now?
First, figure out if you have a federally backed loan.
Then either handle this on your own or you can get us to help you with it. Mission-critical to STOP the foreclosure. We can discuss options and plans after you get the forbearance but stopping the foreclosure is the number one goal.
Kind of like going to the emergency room with a heart attack and a broken leg. Let’s get your heart fixed ASAP then we’ll worry about your leg.
We are happy to help you with this whole process or you can handle it on your own.
You can reach us at 205-879-2447 or you can fill out our contact form. Tell us the date of your foreclosure and if you know what type of loan you have as well as if you have called your servicer yet about getting a forbearance.
Thanks for reading this — I hope it was helpful to you!