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12.3.3.2 No Formal Application Required for CARES Act Forbearance

Significant Law Change

Under the CARES Act, borrowers have the right to receive forbearance if they have “a financial hardship due, directly or indirectly, to the COVID-19 emergency.”30 By recognizing hardships that are indirectly caused by the pandemic, the CARES Act provides relief to a broad scope of hardships. Advocates should cite this language to any servicer scrutinizing whether a hardship is sufficient.

As long the request is made during the covered period, borrowers with COVID-19 hardships have access to forbearance “regardless of delinquency status.”31 Therefore, borrowers who were behind on their loans prior to the pandemic should receive a full twelve months of CARES Act forbearance as long as they have a COVID-19 related financial hardship when they request the forbearance. There are good reasons for this broad coverage. For example, a borrower may have submitted a loss mitigation application after recovering from a hardship only to face a COVID-19 hardship that prevents affording a modification. The forbearance gives the borrower the opportunity to recover financially and have access to loss mitigation options. However, the borrower will generally not have access to the post-forbearance options designed for COVID-19 hardships described below, as these plans generally require borrowers to be current at the time of the pandemic.

The “regardless of delinquency status” should apply to loans already referred to foreclosure. There is no limitation in the statute to pre-foreclosure activity. The pandemic is a nationwide tragedy connected to massive unemployment, and federal law provides a break for borrowers facing it. Advocates should make this point to the courts as needed.

Borrowers activate forbearance by “submitting a request to the borrower’s servicer” and “affirming that the borrower is experiencing a financial hardship during the COVID-19 emergency.”32 The section describing servicer obligation makes it clear that “no further documentation” is needed beyond this “attestation.”33 Borrowers should not have to provide income and expense information, medical records, or other documentation regarding their hardship—a point which the Conference of State Bank Examiners and the Consumer Financial Protection Bureau made in their joint statement.34 In fact, federal regulators have generally interpreted this provision as allowing forbearance requests over the phone. FHA, for example, makes it clear that almost any means of request are sufficient to trigger CARES Act forbearance.

Advocates, however, should consider putting their forbearance requests in writing in order to have confirmation of the borrower’s request and the amount of time requested, especially if the forbearance request becomes an issue in a court proceeding. Advocates should also be aware that if the servicer offers the borrower a forbearance that is accepted by the borrower, the servicer must then send the borrower a written notice of the terms of the forbearance and otherwise comply with the Regulation X requirements for short-term loss mitigation options.35

Footnotes