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Will Mortgage Forbearance & Other CARES Act Benefits Impact My Credit Report?

Due to the financial impact of the COVID-19 pandemic, federally backed loan servicers and some private lenders are offering consumers mortgage forbearance to help them get through this challenging time. During the forbearance period, lenders let consumers temporarily pause or reduce their monthly payments.

Under provisions of the CARES Act, federally backed mortgages can qualify for up to 180 days of forbearance. This covers mortgages from:

  • Fannie Mae
  • Freddie Mac
  • Federal Housing Administration (FHA)
  • Veteran’s Affairs (VA)
  • U.S. Department of Agriculture (USDA)

Although the interest on the loan will still accrue, the consumer doesn’t have to pay any extra fees or provide documentation to enroll.

People who took out a mortgage through a private lender also have options if they are struggling financially. There are many private mortgage providers currently offering flexible payment plans for consumers, however, the terms of private lender plans vary, so consult with the lender directly to get specific information about interest rates and additional fees.

If you are considering requesting a forbearance plan with your lender, make sure you ask how they will report your account to credit reporting agencies. Some lenders choose to include a note on your account that says it is in forbearance or has been affected by a declared disaster. Ask your lender how the account status will be reported, how missed or reduced payments will be reported, and what type of notes or terms will be added.

You should also check your credit reports regularly to ensure they are accurately updated and reflect the forbearance agreement. The three major credit reporting agencies (Equifax, Experian and TransUnion) will offer free weekly online access to credit reports at annualcreditreport.com until April 20th, 2022. Report any errors or information you weren’t expecting to see to your lender and ask them to provide additional details.

Student Loan Forbearance

Federal student loan borrowers are also offered relief through the CARES Act in the form of an interest-free payment suspension. This automatically-awarded forbearance won’t impact consumers’ credit scores and has been extended until September 2021. Some states also have agreements with private lenders to award a three-month forbearance to borrowers that won’t negatively affect their credit, however, interest still accrues.

Unfortunately, some borrowers have run into serious issues with federal loan servicers misreporting their payment status, resulting in serious hits to consumers’ credit reports. On May 19th, the Department of Education announced it was working with the Consumer Financial Protection Bureau to address reporting errors. On May 20th, consumer advocates filed a class-action lawsuit against a federal loan servicer and the three major credit reporting bureaus for their part in reporting errors that negatively affected borrowers’ credit scores.

Just like with mortgage forbearance, consumers should check their credit reports frequently to make sure it is accurate. If it is not, contact the servicer immediately to report it and request more information for resolving the issue.

Our lawyers at Boss Law are committed to helping clients of all backgrounds fix credit reporting mistakes and collect fair and just compensation. If you need more information about taking legal action, please call (727) 877-3188 today to request a free, no-obligation consultation.

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