Part of a series. Covers the change to the US Federal tax return filing deadline and the direct payment.
The Coronavirus Aid, Relief, and Economic Response (CARES) Act includes aid for regular Americans. This article covers two of those items: additional time to deal with Federal taxes and direct payments to individuals.
Please note: before taking action based on this information, please do your own research, including speaking with your CPA, financial advisor or planner, employer, loan servicer, state unemployment office, and heck, maybe even a priest or shaman. My goal is to share my best understanding and to be of service. I hope you find this helpful.
On February 20th, 2020 the first of a series of U.S. stock market drops began in response to the global pandemic and concerns about the effect the disease would have on economic activity worldwide.
On March 21, 2020, an unprecedented spike in first time jobless claims was announced by the Labor Department. There had been 3.2 million first time unemployment claims. The single largest week record before then was for 700,00 back in 1982. Check out this article from Business Insider for details.
On March 27th, the CARES Act was signed. This law provides for loans to corporations, small business loans, household payments, unemployment insurance, tax deferrals and deadline extension, and other funds. Most of the “goodies” we are interested in are in this act.
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This article covers changes for federally-backed mortgages made as part of the CARES Act.
First and foremost let me say, if you can make your mortgage payment, you should. Congress has not forgiven or erased anyone's debt. However, for those who have lost their income due to the pandemic, if you have a federally-backed mortgage this law did provide for some temporary relief.
If you were on the verge of foreclosure already, the CARES Act included a 60 day moratorium starting on March 18th.
If you are not able to make your payment, you should contact your servicer to see what options are available for you.
The CARES Act provided for 180 days of forbearance, which could be extended an additional 180 days. However, many servicers appear to not be leading with this offer. Apparently 90 days is more common in reality. As with all things, what you get will depend upon how familiar you are with your rights, how committed the organization you are negotiating with is to it's goals (and how much flexibility and power the rep on the phone has), and what the two parties can agree upon.
When you contact your servicer, you should state that the need for forbearance is due to the COVID emergency.
The servicer may just pile up the payments due during the forbearance period and ask for them to be paid at the end of the forbearance period. So for example, if you are allowed to skip your $1,000 mortgage payment in April, May, and June, at the end of that time period you would owe $3,000, plus the $1,000 for July that would be due on the regular schedule.
Needless to say, if someone is out of work and out of cash to the point where they can't pay their mortgage payment, it is unlikely that in 90 days they would magically have several times that amount in free cash. Even if someone is back working, they'd likely have the regular payment amount, not a large lump sum. But if you were the bank, wouldn't you ask for that if you could get a client to agree to it?
Be aware that you can request that instead of a lump sum being due at the end of the period that you add payments on the back of the term of the loan.
If you and the servicer agree to something more limiting than what is allowed under the CARES Act, you should honor your agreement, although you could certainly call back and try to renegotiate.
During the time of the forbearance, the CARES Act requires that servicers report you to credit bureaus as paying as agreed (current) and that they charge no fees and no interest during the forbearance.
If your taxes and insurance payments are escrowed, discuss with your servicer how this should be handled. Not having to pay your mortgage payment due to forbearance does not exempt you from having to pay your homeowner's insurance premiums or your taxes.
Journal questions:
What does the current crisis expose about the need for emergency funds?
If you feel there should be more government assistance available now, does this change your thoughts on how our social programs have been constructed to date?
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