Legal Alert

Industry Trades Seek Clarification of CARES Act Forbearance Period

by the Mortgage Banking Group
December 21, 2020

Three industry trade associations sent a letter dated December 17, 2020, to federal agencies, Fannie Mae, and Freddie Mac seeking guidance on the CARES Act concept of the covered period during which a borrower may request a forbearance in making payments on a covered single-family mortgage loan. The industry trades are the American Bankers Association, Housing Policy Council, and Mortgage Bankers Association. The federal agencies are the Federal Housing Finance Agency, U.S. Department of Agriculture, U.S. Department of Housing and Urban Development, and the U.S. Department of Veterans Affairs.

As previously reported, section 4022 of the CARES Act permits a borrower with a covered single family-mortgage loan to request a forbearance from making mortgage payments if the borrower is experiencing a financial hardship due, directly or indirectly, to the COVID-19 national emergency. However, section 4022 does not define what the “covered period” is. Section 4023 of the CARES Act, which addresses forbearances with multifamily loans, defines “covered period” as the date that the CARES Act becomes law until the sooner of December 31, 2020, or the termination date of the COVID-19 national emergency. Section 4021 of the CARES Act, which addresses credit reporting in connection with a credit obligation or account for which a borrower was offered a payment accommodation, defines “covered period” as the period beginning on January 31, 2020, and ending on the later of (1) 120 days after the CARES Act became law (i.e., 120 days after March 27, 2020) and (2) 120 days after the date that the COVID-19 national emergency terminates.

In the letter, the industry trades note that “servicers are actively engaged in the delivery of payment relief to all borrowers in need as a result of the pandemic.” The trades “urge the agencies to publicly announce that the COVID-19 forbearance programs will continue to be available through the National Emergency period, allowing sufficient time for borrowers to access this assistance and servicers to plan for continued program delivery over the coming months.”

Copyright © 2020 by Ballard Spahr LLP.
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