August 3, 2020
Under the CARES Act passed in 2020 to help financially stricken Americans, all government-backed mortgages had foreclosure-avoidance measures instituted to protect homeowners from losing their homes during COVID-19.
Those with VA, USDA, and FHA mortgages had all foreclosure actions suspended until the end of August 2020; the CARES Act forbids lenders and loan servicers “from beginning a judicial or non-judicial foreclosure against you, or from finalizing a foreclosure judgment or sale”.
That foreclosure protection started March 18, 2020 but under the current version time is running out to act–these protections expire August 31, 2020.
Those who have a financial hardship due to the coronavirus pandemic, may request an FHA loan forbearance for up to 180 days and an extension for an additional 180 days is also offered. This is NOT automatic and requires the borrower to make arrangements with the loan servicer.
Saving your home requires you to act fast before missing even a single payment–contacting your lender is the only way to get loan relief, but protecting your current mortgage is only one motivation to get involved in a mortgage relief program; doing so may protect your future credit scores by avoiding the damage that a mortgage loan default or foreclosure can bring.
Any borrower who has an eye on applying for a cash-out refinance loan later down the line does well to be very careful about late and missed payments.
Protecting your credit during the coronavirus pandemic means making all payments on time. It’s obvious this practice isn’t possible for all borrowers, especially in a global emergency. But for those who are able, this is one of the best ways to protect your credit.
Take whatever mortgage relief options are currently open to you and make a plan to continue your on-time payments as much as possible. Some rode out the early days of the COVID-19 emergency without having to worry about their mortgages.
But as further damage to the U.S. economy creates doubt about job futures in many sectors, it’s wise to know your options long before you need them.
Take preventive measures to protect your credit rating during these times. You can subscribe to credit monitoring, you can review your credit reports, and pay close attention to the ups and downs of your credit score, but in concert with this you will need to maintain the most consistent record of on-time payments you can for best results at loan application time.
At press time, the last day of August is the final day of the CARES Act foreclosure relief program unless it is extended. Borrowers should contact their loan servicers as soon as possible to avoid missing out on CARES Act assistance if it is needed.
Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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