Blog
Law Offices of Chance M. McGhee

Call Today for a FREE Consultation

210-342-3400

Archive for the ‘CARES Act’ tag

Pandemic Mortgage Forbearance

May 25th, 2020 at 7:00 am

Mortgage delinquencies skyrocketed in April. One big reason: the pandemic CARES Act provided for extraordinary mortgage payment forbearance.  

 

Epic Increase in Mortgage Delinquencies

The number of home mortgages that became delinquent in April was largest one-month increase in U.S. history. 1.6 million mortgages current in March were not paid in April, according to Black Knight, a mortgage data provider.

For some perspective, the percentage of all mortgages that became delinquent nearly doubled in that one month—from 3.39% to 6.45%. This percentage increase was also the largest in history. It broke the last record monthly percentage increase set in 2008, during the Great Recession. The April increase was nearly 3 times the monthly increase back then. This is in spite of the reality that the Great Recession was an epic mortgage crisis.

The size of April’s increase reflects the unprecedentedly sudden economic effects of the pandemic—the self-induced shut-down. 

It was also substantially fed by the mortgage relief provided by the Coronavirus Aid, Relief, and Economic Security Act (“CARES”) Act passed by Congress in late March. As of May 19, 2020 more than 4.75 million mortgages had entered into forbearance—authorized deferred payment—plans. Black Knight Press Release, May 22, 2020.

So homeowners are clearly taking advantage of mortgage forbearances. Should you, too? It’s been nearly two months since the CARES Act became law, a good time to review its mortgage benefits. Here is what it provided.

CARES Applies Only to Federal Mortgages

At the outset be aware that CARES applies only to federally- owned or -backed mortgages. About three-quarters of all mortgages are federally owned or backed by a federal agency or entity. These include U.S. Department of Housing and Urban Development (HUD), U. S. Department of Agriculture (USDA Direct  and USDA Guaranteed Federal Housing Administration (FHA) (includes reverse mortgages) ), U.S. Department of Veterans Affairs (VA), Fannie Mae (check here to see if your loan is backed by Fannie Mae) , Freddie Mac (check here to see if your loan is backed by Freddie Mac).

Also check out the U.S. Consumer Financial Protection Bureau’s How can I tell who owns my mortgage?

If You Don’t Have Federal Mortgage

Contact your mortgage servicer if you have a mortgage not owned or backed by a federal agency or entity. Financial regulators have urged all financial institutions to work with borrowers in this extraordinarily disruptive time. Interagency Statement on Loan Modifications…, April 7, 2020.  

Here’s a list of some of the pandemic-related services offered by a huge number of the nation’s banks. Many include references to mortgage payment deferrals and forbearance.

CARES’ Mortgage Relief Options

For federally owned or backed mortgages, the CARES Act provided two separate forms of relief. These included a short moratorium on foreclosures and forbearance of monthly payments.

The foreclosure moratorium was so short that it’s already expired. It was in effect for only 60 days starting from March 18 through May 17, 2020. During this period CARES prevented the starting or completion of a judicial or non-judicial foreclosure. CARES Section 4022(c)(2).

The forbearance part of the law is the focus of the rest of this blog post.

Mortgage Servicer “Shall Provide the Forbearance”

The CARES law is quite straightforward. The mortgage servicer (the entity you make mortgage payments to) “shall… provide the [requested] forbearance”:

  • to a borrower who “submit[ted] a request”
  • including an “affirm[ation] that the borrower is experiencing a financial hardship during the COVID–19 emergency”              

The servicer can’t:

  • require “any additional documentation … other than the borrower’s attestation to a financial hardship caused by the COVID–19 emergency”
  • charge any “fees, penalties, or interest (beyond the amounts scheduled or calculated as if the borrower made all contractual payments on time and in full under the terms of the mortgage contract)”
  • require that the mortgage be in any particular “delinquency status” in order to provide the forbearance

CARES Section 4022 (b) and (c)(1).

Length of Forbearance

“Upon a request by a borrower for forbearance… such forbearance shall be granted for up to 180 days, and shall be extended for an additional period of up to 180 days at the request of the borrower, provided that, at the borrower’s request, either the initial or extended period of forbearance may be shortened.”

CARES Section 4022 (b)(2).

There’s a potentially important timing condition when the borrower submits the extension for an additional 180 days of forbearance. “[T]he borrower’s request for an extension [must be] made during the covered period.” CARES Section 4022 (c)(1). “Covered period” is a phrase used earlier in the Section, referring almost certainly to the officially declared national “COVID-19 Emergency.” That is, the borrower must submit the request for a 180-day extension while this emergency is still in legal effect.

After Getting Your Mortgage Forbearance

The CARES Act does not say anything about the timing for repayment of the deferred payments. That crucial issue is the topic of our next blog post.

 

Student Loan Changes in the CARES Act

April 20th, 2020 at 7:00 am

The recent coronavirus relief law includes help for some student loan borrowers—suspending payments, interest, collections, credit reporting.  

 

The 880-page Coronavirus Aid, Relief, and Economic Security Act (“CARES”) has 4 pages of help for certain student loan borrowers. Section 3513 of CARES. It provides meaningful albeit temporary help, for those who qualify by having the right kind of student loan.

The Kinds of Student Loans Covered

First, the relief applies only to federal student loans, not to private student loans. The private loan portion of student loans has been growing but still only consists of about 8% of student loans. Nevertheless, private student loans total about $125 billion. The CARES Act does not help if you owe any of this.

Second, not all federal student loans are included. Direct Loans—those made directly by the federal government’s Department of Education—are covered. Federal Family Education Loans—FFELs—are covered if they’re currently owned by the federal Department of Education. FFEL loans held by commercial lenders and campus-based Perkins loans are not covered. These non-covered loans amount to only about 12 percent of federal student loan dollars, so most federal student loans are covered.

The Key Benefits

For the applicable federal student loans, CARES accomplishes the following:

  1. Suspends all loan payments through September 30, 2020.
  2. Waives interest during this suspension period.
  3. For credit reporting purposes, the lender must treat each suspended payment as if the borrower actually paid the payment.
  4. Student loan creditors must suspend involuntary collection during the suspension period.
  5. The payment suspension time counts for purpose of loan forgiveness and loan rehabilitation.

1. Payment Suspension

The new law suspends “all payments due for [applicable student] loans… through September 30, 2020.” Section 3513(a), CARES Act. The law did not specify when this non-payment period started. But since then the U.S. Department of Education has specified that the “administrative forbearance will last from March 13, 2020 through September 30, 2020.” (Administrative forbearance means a “temporary suspension of payments.”) Coronavirus and Forbearance Info for Students, Borrowers, and Parents.

If you’ve already made a payment during the same March 13 through September 30, 2020, your student loan servicer should refund it to you. This includes auto-debit payments, which are supposed to stop automatically during this same period. Coronavirus and Forbearance Info for Students, Borrowers, and Parents.

2. Interest Waiver

“[I]nterest shall not accrue on a[n applicable student] loan… for which payment was suspended for the period of the suspension.” Section 3513(b), CARES Act. So no interest will accrue during the March 13 through September 30, 2020 period. This should happen automatically, without requiring any action by you. Coronavirus and Forbearance Info for Students, Borrowers, and Parents.

3. Credit Reporting

“During [this same] period… , for the purpose of reporting information about the loan to a consumer reporting agency, any payment that has been suspended is treated as if it were a regularly scheduled payment made by a borrower.” Section 3513(d), CARES Act. The suspended payments should show as actually made payments on your credit reports.

4. Collection Freeze

“During the [same ]period [the loan servicers] shall suspend all involuntary collection related to the loan.” Section 3513(e), CARES Act. The law lists three specific types of collection that are explicitly included: wage garnishment, tax refund offset, and administrative offset by “a reduction of any other Federal benefit payment.” But it also broadly adds “any other involuntary collection activity.” Section 3513(e)(1-4), CARES Act. So during the March 13 through September 30 period, no collection activity of any kind should happen on the applicable student loans.

5. Non-Payments Count

“[E]ach month for which a loan payment was suspended [counts] as if the borrower of the loan had made a payment for the purpose of any loan forgiveness program or loan rehabilitation program… for which the borrower would have otherwise qualified. Section 3513(c), CARES Act.

This means that if you are now in an Income-Driven Repayment (IDR) plan, these months of non-payment count towards loan forgiveness as if you had made the payments. The same is true for monthly credit towards Public Service Loan Forgiveness (PSLF). Also, if you are working on “rehabilitating” your defaulted student loan, the suspended payments count as payments made for that purpose. Coronavirus and Forbearance Info for Students, Borrowers, and Parents.

 

Note: Please see our last several blog posts for information on other relevant aspects of the CARES Act. Contact your local bankruptcy lawyer to apply these to your own unique circumstances.

 

Enhanced Unemployment Benefits Under the CARES Act

April 6th, 2020 at 7:00 am

The greatly enhanced unemployment benefits mean much more money each week, for longer, for many more kinds of workers, and for many others.


Our blog post last week was about the emergency $1,200 Economic Impact Payment that’s “rapidly” coming to most American adults. (Plus $500 for each qualifying dependent child.) For updates on this payment since then, see the IRS’ special “Coronavirus Tax Relief” webpage. That links you to its News Release IR-2020-61, which came out on March 30, 2020. It was modified and updated on April 1, specifically about Social Security recipients.

Today’s blog post is about the new greatly enhanced unemployment benefits provided by the same law. The $2.2 Trillion Coronavirus Aid, Relief, and Economic Security Act (“CARES”) includes about $260 Billion for expanded unemployment benefits. Although that’s only about one-eighth of the whole package, it’s still a huge amount of money. By way of comparison, $260 Billion is almost 40% of last year’s entire defense budget.

These new unemployment benefits include the following distinct components.

Larger Checks—Federal Pandemic Unemployment Compensation

Individuals who already qualify for unemployment benefits under state law will get an additional $600 per week. This extra is called Federal Pandemic Unemployment Compensation. The states will pay this extra $600 per week in addition to the regular amount of unemployment benefit. Section 2104 of CARES.

This is quite a big increase, especially compared to the usual weekly amount. That usual amount varies widely. In Connecticut the maximum benefit is $631, in Florida it’s $275. No matter your state, the additional $600 per week is a very meaningful increased benefit. 

Longer Payment Period—Extended Unemployment Compensation

Individuals usually get up to 26 weeks of unemployment benefits under state law. Some states provide less. For example, Florida gives only 12 weeks of benefits. CARES adds up to 13 more weeks of benefits, for up to 39 weeks of benefits. Section 2102(c)(2) of CARES.

These additional weeks of benefits include BOTH the regular state unemployment benefit amount PLUS the $600 per week referred to above. Section 2102(d)(1)(A) of CARES.

Extension of Exhausted Benefits—Available to Work but Can’t Find Work

The new law also reinstates unemployment benefits for those “have exhausted all rights to regular compensation under the State law or under Federal law” for the benefit year. This assumes that the individual is “able to work, available to work, and actively seeking work.” Section 2107(a)(2) of CARES.

The unemployment benefit amount under this part of the law includes the regular state-determined weekly amount plus $600, as discussed above. Section 2107(a)(4) of CARES.

Pandemic-Related Individuals—Virtually Everyone Who’s Impacted

The law gives unemployment benefits to a wide array of individuals affected by the health emergency, covering 10 categories. An individual who doesn’t otherwise qualify for the unemployment benefits receives them by providing a “self-certification” stating that he or she is “unemployed, partially unemployed, or unable or unavailable to work because” of the following conditions. The individual:

  1. has been diagnosed with COVID-19 or has symptoms and is currently being diagnosed
  2. has a household member who’s been diagnosed with COVID-19
  3. is caring for a family or household member diagnosed with COVID-19
  4. has a child or other dependent who can’t go to school or a care facility because of the health emergency
  5. can’t get to the workplace because of a quarantine
  6. can’t get to the workplace because of being “advised by a health care provider to self-quarantine due to concerns related to COVID–19”
  7. was scheduled to return to work but can’t because of the health emergency
  8. became the “breadwinner or major support for a household “because the head of the household has died as a direct result of COVID–19”
  9. “has to quit his or her job as a direct result of COVID–19”
  10. lost a job because the “place of employment is closed as a direct result of the COVID–19 public health emergency”

Section 2102(a)(3)(A) of CARES.

Consistent with the other parts of the law, the amount of weekly benefit is the regular state-determined amount plus $600. Section 2102(d)(1)(A) of CARES.

Nontraditional Workers Get Benefits—More “Covered Individuals”

Self-employed and independent contractors are usually not covered by state unemployment benefits. Very significantly, many of the benefits we’re discussing here do apply to these nontraditional workers. The law says that

The term “covered individual”—(A) means an individual who

(II) is self-employed, is seeking part-time employment, does not have sufficient work history, or otherwise would not qualify for regular unemployment or extended benefits under State or Federal law or pandemic emergency unemployment compensation under section 2107 and meets the requirements of subclause (I)

Section 2102(d)(1)(A) of CARES. The reference to Section 2107 is to those who already qualify for benefits otherwise, as discussed two sections above. The other reference to subclause (l) is to the list of 10 COVID-19-related circumstances listed in the section immediately above. So the self-employed and independent contractors receive unemployment benefits if they fit any of the 10 conditions.

However, these benefits to the self-employed and independent contractors are not available to those who can work remotely—who can “telework with pay.” Also individuals “receiving paid sick leave or other paid leave benefits” don’t qualify. That’s true even if they fit into any of the 10 COVID-19-related categories discussed above.

 

Call today for a FREE Consultation

210-342-3400

Facebook Blog
Back to Top Back to Top