Mortgage holders falling through gaps in safety net

More than 1 million homeowners are at least 30 days behind on their mortgage payments despite aid from the CARES Act, a sign that the law meant to ease financial stress and ward off foreclosures has let many fall through the cracks, data from real estate analytics company Black Knight shows.

Misconceptions and a lack of awareness have led to the pitfall, say housing counselors, leading some in both the House and Senate to call for automatically enrolling borrowers who are 60 days behind on their mortgages into forbearance, or a temporary reduction or pause in payments. A disproportionate share of minorities were failing to take advantage of forbearance, according to Census data.

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“An automatic forbearance would allow homeowners who do not reach out to their servicers a needed pause so they can have the opportunity to limit their arrearage, minimize fees and work with the servicer before they find themselves in a foreclosure,” argued Alys Cohen, staff attorney for the National Consumer Law Center, in a July 16 House committee meeting on how to protect homeowners during the pandemic. “Given the disparities in accessing mortgage help right now, adopting this policy would help prevent a huge wave of foreclosures in Black and Latinx communities in the near future.”

The CARES Act, passed by Congress in March to relieve the economic devastation caused by the novel coronavirus, gave homeowners who are struggling financially the right to take up to 360 days of forbearance if their mortgages are backed by the federal government.

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Do you qualify for forbearance?

Loans guaranteed by the Department of Veterans Affairs and Federal Housing Administration, known as V.A. and F.H.A. loans, qualify for forbearance under the CARES Act.

So are loans backed by the government-sponsored mortgage-finance companies Fannie Mae and Freddie Mac. Both have provided online tools to look up whether they are backing your loan. Fannie Mae’s look-up tools are at, and Freddie Mac’s are at

Homeowners with mortgages not covered by the act are still encouraged to contact their servicer to see what options are available if they are struggling financially.

The majority of the homeowners who have fallen behind on their mortgage payments likely fall into that category — 680,000, or 62 percent, are federally backed, according to Black Knight. Homeowners with loans not backed by government-sponsored mortgage-finance companies such as Fannie Mae and Freddie Mac can also request forbearance.

In fact, a higher share of loans held by banks and private-label securities are in forbearance than those held by Fannie Mae and Freddie Mac: 10.5 percent, compared to 4.6 percent, according to the Mortgage Brokers Association.

“I can’t say it’s 100 percent across the board,” said Ellie Pepper, head of relationships and innovations for the National Housing Resource Center, of forbearance options offered for loans not backed by the government. “But we’re seeing and hearing that a lot of them are offering something.”

The center surveyed housing counselors in July about problems faced by homeowners. Nine out of 10 counselors, who provide homeowners free mortgage advice, said they had heard from families who are delinquent, or about to become delinquent, on their mortgage payments.

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The majority of counselors — 70 percent — said they had clients who knew about forbearance, but were afraid they would have to pay a lump sum repayment at the end of forbearance, which is not true for federally backed mortgages and can be negotiated with servicers for other types of mortgages. Fifty-seven percent said they had also had clients who were unaware forbearance was an option.

Trust is also an issue, Pepper said. “Particularly in the Black and Brown communities, there’s a deep, deep level of mistrust. Especially given the history of what’s gone on in those communities when it comes to lenders,” she explained. Housing counselors have also reported hearing about forbearance-related scams.

As a result, when a homeowner receives a letter promising relief on mortgage payments, they may not be sure whether it’s legitimate, Pepper explained.

She recommended that homeowners who are struggling financially reach out to a housing counselor approved by the Department of Housing and Urban Development to talk through options.

“In the financial crisis, it was proven that people who worked with a HUD counseling agency (got better loan modification options) than people who did not go through a housing counseling agency,” she said. “Different lenders work in different ways, but the bottom line is that’s something the housing counselor can help figure out.”

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