Education for borrowers: 5 Cares Act details you should know about

Like the disease that effected it, there is an unusual amount of uncertainty surrounding this Act. The Coronavirus Aid, Relief, and Economic Security else known as CARES Act was signed by the president on March 27 after having passed both the House and Senate. In its wake, the Act has brought uncertainty in the mortgage performance amidst the widespread hardships brought about by the virus.

No one was expecting the virus, and even the country was not prepared for such an emergency, which makes the situation very complicated. One thing for sure is the inconsistency, and at times, there have been faulty messages about public loss-mitigation requirements, which has made the situation a lot worse. Much information about the virus and efforts made have now become a public spectacle, and much information is being publicized on TV, by politicians and news outlets, and while some pieces of what’s getting out to the public are somewhat accurate, most of it is not.

Given the overwhelming nature of what we are dealing with, this is totally understandable.

However, stirring winds particularly harder is the CARES Act and some other related policies. Now, the loss mitigation may be the most effective, supposing the single-family housing-finance industry stakeholders communicated clearly on some aspects of the law. Within the 800-page bill, there are some provision affecting the borrowers and employers, including the requirement for the coverage of COVID-19 testing and treatment.

Additionally, there are other provision extending to and beyond the coronavirus into other aspect of the employer benefit designs and that has the potential to impact group health plans beyond the current emergency situation.

FIRST, YOU NEED TO UNDERSTAND NOT EVERYONE’S ELIGIBLE

There is a mixed reaction around this new law. Some are happy at least; some are not and some are confused. Some borrowers think that a federally mandated penaltyfree payment break as a result of the coronavirus removes their obligation to make the payments for the time being. While that is true, in reality, it is available only upon request for certain government-related loans, pay attention to that as the borrowers that suspend their payments are still very much responsible for making them later.

What does this mean, if you are capable of continuing with your payments, do not stop. The mortgage industry must come clear emphasizing this message to the public.

”If I were writing the script, I would say something like, ’Forbearance is not forgiveness, but there will be a deferred payment until you get back on your feet,’” said Faith Schwartz, a housing finance consultant who helped set loss mitigation policy during the 2008 housing crisis.

”Forbearance does not mean your payments are forgiven. You are still required to eventually fully repay your forbearance, but you won’t have to repay it all at once — unless you are able to do so,” the Freddie Mac script says.

SECONDLY, THE CARES ACT IS VERY VAGUE ON REPAYMENT PATHS

What the Act has been clear about is that loan servicers should not penalize borrowers for deferring their payments, however, what is unclear with the bill is that it doesn’t specify what happens afterward when the grace period ends.

However, it is encouraging that some entities are already making plans and mapping those plans for how they will handle this. The best example is the Bank of America, which is currently implementing a plan to add payments deferred for the Coronavirus hardships to the end of portfolio loans’ terms and extend regular payments by the amount forborne.

Therefore, it is important to seek direction with your loan servicer on the repayment plan afterwards, to avoid confusion and more hardship. One thing is certain, for the people seeking out ”breaks” in their payment without a repayment plan, they might face financial hardship.

THIRDLY, NOTHING’S FREE! ALL CORONAVIRUS ACCOMMODATIONS GET A PASS ON CONSUMER CREDIT RECORDS

You need to understand that deferral requirements are restricted to certain federal loans. The CARES Act also has defined a broader mandate for the accommodations made to address the impact of the Coronavirusrelated hardships on other types of consumer debt. Under the provision, the borrowers that stick to the terms of that accommodation must be temporarily reported as current on their credit reports.

”This accommodation includes anything, whether it’s [one made for] a mortgage loan that’s not federally backed or any other type of loan like a credit card, a boat loan, a car loan, anything at all,” said John Ulzheimer, a former credit bureau employee and president of The Ulzheimer Group, a consulting firm in Atlanta. ”As long as there’s an accommodation that’s made by a lender and you live up to that agreement, then they have to report you as current.”

It is recommended that consumers check their reports to see if this requirement reflects on their statements as the credit reporting companies themselves are experiencing their own hardships.

FOURTH, WHAT’S HAPPENING WITH THE COVERAGE OF COVID-19 TESTING AND TREATMENT?

The best action is that group health plans have to cover COVID-19 screening and related office visits without cost-sharing. This has to include COVID-19 tests that may not have been approved by the FDA. Additionally, the group health plans must also include without costsharing, ”qualifying coronavirus preventive services,” which are items, services, and immunizations that are intended to prevent or even mitigate COVID-19 that receive a rating of ”A” or ”B” from the US Preventive Services Task Force (USPSTF) or even a recommendation from the CDC Advisory Committee on Immunizations Practices (ACIP) concerning the individual involved.

LASTLY, EVEN WHEN PAYMENT RELIEF ISN’T REQUIRED, IT MAY BE AVAILABLE

Some individual companies may opt to provide deferrals or other types of assistance in response to the coronavirus related financial concerns even when they are required not to do so. Again, this is best shown by the Bank of America, which has offered a three-month payment deferral without penalty. Borrowers can request this online or by phone for the many mortgages it holds in its portfolio. The bank has also said that it may extend that through the duration of the crisis if need be.

Sources and Works Cited

https://www.nationalmortgagenews.com/list/5- cares-act-details-mortgage-servicers-mustensure-borrowers-know https://www.benefitnews.com/opinion/5-thingsemployers-need-to-know-about-the-cares-act