To help homeowners and renters have the most up to date and accurate housing assistance information, the Consumer Financial Protection Bureau (CFPB), Federal Housing Finance Agency (FHFA) and Housing and Urban Development (HUD) launched the new mortgage and housing assistance website. You can also use their tools to determine if your mortgage is federally backed and for renters to find out if their rental unit is financed by FHA, Fannie Mae or Freddie Mac.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act requires the servicers of federally backed mortgages to postpone mortgage payments at the borrower’s request, provided the borrower affirms financial hardship due to COVID-19. The postponement must be granted for up to 180 days and extended for an additional period of up to 180 days at the borrower’s request. During this period, no fees or penalties are allowed to accrue.
Considerations around mortgage relief:
If you’re struggling to pay your mortgage due to COVID-19, contact your mortgage company to determine whether your loan is federally backed and what options are available to you (e.g., defer payments, make a partial payment, modify a loan or contract).
This relief could help stabilize your finances by allowing you to prioritize your spending on areas in which no financial relief is available.
In addition, understand that other areas of financial assistance may be available.
The CFPB has adopted rulemaking that provides additional foreclosure protection under certain circumstances for borrowers more than 120 days delinquent through December 31, 2021.
Federally Backed Mortgages (e.g., HUD, VA, FHA, USDA, Fannie Mae, Freddie Mac mortgages):
Understand the details
If you have a federally backed mortgage, the CARES Act requires mortgage servicers to allow you to postpone payments for up to 180 days upon request, and up to an additional 180 days, if requested. If you entered forbearance on or before June 30, 2020, you may be eligible to receive up to an additional six months of postponed payments, in three-month increments.
- If you postpone payments under the CARES Act, your mortgage company cannot charge late fees or penalties.
- The foreclosure and eviction moratorium for federally held, single-family mortgage has been extended up to July 31, 2021.
Bear in mind, available relief and the deadline to request relief may vary from agency to agency. Also, different companies have different policies on how to make postponed payments, including requiring you to pay the entire missed amount when payments resume. It’s important to understand the implications of each option.
For mortgages that aren’t federally backed:
The COVID-19 relief legislation does not provide any relief or protection for mortgages that aren’t federally backed. However, many lenders are providing assistance programs to help homeowners affected by coronavirus. We recommend you contact your lender to determine what options may be available to you.
Similar to the guidance above, be sure to understand the trade-offs of your options, such as when you may need to pay back postponed payments, how interest or fees might accrue, and the potential effect on credit reporting.
Through October 3, 2021, the Centers for Disease Control and Prevention (CDC) has prohibited landlords from evicting tenants who can no longer afford to pay rent subject to certain conditions for renters in counties with high rates of COVID-19 transmission. The CDC eviction moratorium is subject to a pending lawsuit. Please check the CDC's website for the latest information on the status of this order.
You would still be required to pay rent owed per the terms of your lease, but you will be allowed to stay in your unit through October 3, 2021. Depending on the terms of your rental agreement, you may also be charged fees, penalties or interest as a result of the failure to pay rent upon the expiration of this order.
If you’re struggling to make rent and have a good relationship with your landlord, we recommend letting them know of your situation and determining if there’s an agreeable modification to your rental payments. If your landlord begins pursuing eviction during this period, you may need to get a legal advocate to represent you. Many communities have local organizations dedicated to providing advice to renters.
The federal government automatically deferred federally held student loan payments through January 31, 2022, with no interest accruing during the suspension period.
Federally Held Student Loans
The suspension of payments and associated interest offers an opportunity to use what you would normally pay to create more financial stability. Consider deploying those funds in the following order:
Cover other expenses
If you are struggling with current expenses, prioritize necessary expenses for which you can’t obtain assistance from public or private programs.
Build your emergency fund
We generally recommend keeping three to six months of expenses in cash as an emergency fund, and you may want to err toward the longer side, given uncertainty surrounding this environment.
Pay down other debt or invest for other financial goals:
Debt reduction: Rather than making voluntary payments toward debt that isn’t accruing interest, consider paying down other debts, starting with your highest-interest debts.
Invest for other goals: If you have adequate emergency savings, aren’t trying to pay down debt and are confident in your financial stability. Investing the money for retirement, education or other financial goals may be beneficial.
Make voluntary payments to pay down federally held student loans
Because interest isn’t accruing, voluntarily making your normal payments will enable you to pay down your loans more quickly.
This time will continue to count toward loan forgiveness programs, even if payments are not made. If you’re working toward a loan forgiveness program, since interest isn’t being accrued, it likely makes sense to discontinue payments until January 31, 2022 (and not make any voluntary payments).
Loan servicers aren’t permitted to report any negative credit events on your credit report for not paying during this period. However, credit reporting mistakes are routinely made, so it’s a good idea to check your credit report. Individuals can refer to the Federal Student Loan Servicers website for FAQs or for contact information regarding deferment or forbearance.
Private Student Loans
For privately-held Federal Family Education Loans (FFEL), payments are automatically suspended (with no interest accruing during the suspension period) and there is a moratorium on collections through January 31, 2022. The FFEL relief which first became available in April 2021 and was retroactively applied to March 13, 2020, includes the following:
- The Department of Education will work to provide an automatic return of any tax refunds seized or wages garnished since March 13, 2020 and retroactive implementation of a 0% interest rate for these loans.
- A return to good standing for any FFEL loans that went into default since March 13, 2020, including the removal of the default from credit records.
- The option to request a refund of any voluntary payments made since March 13, 2020.
If you don't have an FFEL loan, many private lenders are providing assistance programs to help borrowers affected by the pandemic. However, the specific details around the programs vary, and interest may continue to accrue. We recommend you contact your loan servicer to determine what options may be available to you.
Taxation of Student Loan Forgiveness
If you qualify for student loan forgiveness or cancellation, you will not have to pay taxes on any amount forgiven on or after Jan. 1, 2021, and before Jan. 1, 2026. This applies to loans for postsecondary education expenses only.
While the federal government does not provide any relief for private loans and loans that are not federally held, many private lenders are providing assistance programs to help borrowers affected by coronavirus. However, the specific details around the programs vary, and interest may continue to accrue. We recommend you contact your loan servicer to determine what options may be available to you.
These materials are for general education only, and any specific questions related to your individual circumstances should be discussed with your personal financial, tax or legal advisor, as appropriate.
Edward Jones has not independently verified and is not responsible for third-party content.