SFA Analysis of Section 4022 of CARES Act

By Dallin Merrill

Section 4022 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act covers a nationwide foreclosure moratorium and the consumer’s right to request a forbearance.  The requirements in this section applies only to “Federally-backed mortgages”, which are loans insured or guaranteed by FHA, VA, USDA, or loans that are owned or securitized by Fannie Mae or Freddie Mac. It does not apply to private loans. The time period for requesting forbearance coincides with the national emergency declaration concerning COVID-19.

Consumers with a Federally-backed mortgage whose pay status is current as well as borrowers who are delinquent may request forbearance relief. The consumer may submit a request to their servicer affirming that they have a financial hardship resulting from COVID-19. A borrower’s attestation that they are experience hardship is all that is required for the servicer to grant the forbearance or an extension of the forbearance; the servicer may not require any other documentation. Servicers are obligated to notify borrowers of their right to request forbearance as part of their regular, ongoing communications with borrowers.

Upon a borrower’s attestation that they are experiencing a financial hardship caused by COVID-19, the servicer must grant a 180-day forbearance. Thereafter, a borrower request to extend the forbearance period up to an additional 180 days, for a total of up to 360 days (180-day initial forbearance + 180-day extension). The extension requires a separate request from the borrower making an attestation of the financial hardship. This means that a borrower may be in forbearance up to 360 days after the end of the national declaration of emergency concerning COVID-19.

During the forbearance period, no fees, penalties or additional interest will apply. The servicer will pay or advance funds in a timely manner. For the 60-day period beginning on March 18, 2020, no servicer of a Federally-backed mortgage loan may initiate a foreclosure process, move for a foreclosure judgment, or execute a foreclosure-related eviction or sale.