Looking to understand how the government stimulus law known as the COVID-19 CARES Act may help homeowners? Read this guide.
Congress passed the $2 trillion CARES Act stimulus package in late March to support the millions of Americans who are financially impacted by coronavirus pandemic. This 247-page law contains a wide variety of assistance to different groups, but for the average homeowner, the key features include:
- $1,200 cash payments to eligible individuals
- Mortgage deferment options for federally backed loans
- Pushing back the tax deadline to July 15, 2020
- Expanded unemployment coverage
The intent of the CARES Act law is to help people continue to pay essential bills such as rent, mortgage, and utilities. The CARES Act stimulus package also contains relief options for small businesses to keep workers employed by taking out forgivable SBA loans.
This article offers a brief guide for homeowners on what to know about the stimulus bill.
Rent and mortgage payment help
If you own a home and are experiencing financial hardship, you may be able to get some help.
For owners whose mortgage is federally backed by Fannie Mae, Freddie Mac, FHA, VA, HUD, or USDA, you may request forbearance up to 180 days. Forbearance is when you have the right to pause or pay reduced mortgage payments for a limited time period.
You should contact your loan servicer to get COVID-19 mortgage relief. In order to qualify, you must be able to prove that you lost your job. Find out what options you have for mortgage relief.
Homeowners may also be able to postpone mortgage payments for up to 12 months.
The COVID-19 CARES Act provides relief only for federally backed mortgages. But your loan servicer can offer mortgage relief even if it’s not federally backed.
Forbearance vs deferral
Note that there is a difference between forbearance relief and deferral relief.
When a loan is deferred, it simply means you’re pushing the due date further out. You will still incur interest during this time, which you need to pay.
When a loan is in forbearance, you won’t incur any fees, penalties, or interest.
If you don’t qualify for forbearance relief, it might still be helpful to contact your mortgage provider and ask if you can receive a deferral relief. Many banks, such as Fifth Third, Marcus (owned by Goldman Sachs), and TD Bank are offering borrowers some mortgage relief by delaying payments.
Suspension of foreclosure
Additionally, the homeowner stimulus puts a temporary federal moratorium on foreclosures.
This means that lenders will not have the right to take back properties in which the borrower is in default for getting behind on payments. Foreclosure laws differ from state to state.
Delays, glitches, and fund limits
If you’re expecting to receive some of the funds contained in the stimulus, you should be aware of some of the technical challenges.
The coronavirus stimulus law made $350 billion available in small business loans to help business owners keep payroll. Despite the Small Business Administration’s (SBA) website experiencing glitches, the government received thousands of applications very quickly. The program effectively ran out of money only days after it started. Congress passed a second round of funding for small businesses at the time of publishing this article.
There were also delays in issuing $1,200 stimulus checks to individuals. People who don’t have direct deposit information filed with the government may experience issues. For some recipients, the government will need to mail the check and the delay could take several months or more.
Despite the delays, staying on top of what’s going on is important, especially if you’ve lost your income and need this money to stay afloat.
Qualifying for the $1,200 checks
A one-time payment for $1,200 will go out to everyone who qualifies. Here’s what you need to know in order to be eligible:
- You must have an adjusted gross income of $75,000 or less
- If you’re married (without kids) you need to make less than $150,000 in order to receive $2,400
- Those who filed as head of household will get this amount if they earned $112,500 or less
- For those who have kids, every qualifying child who is under the age of 16 will receive an extra $500.
These numbers are based on your 2019 tax return. If you did not yet file your 2019 taxes, it is based on 2018.
Note: If you’ve experienced job loss or hardship in 2020, as millions did, you’d need to take these losses into consideration for your 2020 taxes.
No need to apply for the stimulus checks
To move things along, no one needs to apply to receive the stimulus payments.
If the IRS has your bank account from your previous few years’ worth of taxes, they will transfer the money directly into your account.
The payment date is a waiting game for some
There have been various reports about when checks should reach taxpayers. The IRS processed $80 million direct deposit checks on April 11.
More checks were expected to go out beginning on April 20. But reportedly it could take until later in the summer for many to begin receiving checks.
Here’s a tweet from the IRS on April 11:
#IRS deposited the first Economic Impact Payments into taxpayers’ bank accounts today. We know many people are anxious to get their payments; we’ll continue issuing them as fast as we can. For #COVIDreliefIRS updates see: https://t.co/hEEWmgHA9V pic.twitter.com/2bSHOTjMAS
— IRS (@IRSnews) April 11, 2020
A report said these $1,200 direct deposits went to middle and lower income adults, plus $500 for each qualifying child.
How quickly you receive funds may depend on whether you’re enrolled in direct deposit with the federal government. If not, you’ll likely receive a paper check, which will take longer.
An extra $600 per week for unemployment benefits
The federal government said it will tack on an extra $600 per week, on top of state unemployment payments. Note that each state is different. For example, in California, the maximum a resident may receive is $450. So with the extra $600, a worker can get $1,050 per week. This amount will last up to four months.
Gig workers, self-employed individuals, contract workers, and independent contractors are also eligible.
Unemployed individuals will get an extra 13 weeks of pay
The stimulus bill will give eligible people an additional 13 weeks of pay. States that normally offer 26 weeks of unemployment would be able to provide a total of 39 weeks, for example.
The government also provided help for those who have student loan debt by waiving two months of payments and interest. This applies to federal student loan borrowers.
Automatic payments may be suspended for federal borrowers. If you’re able to see your loans through your lender’s website, log in to see what options may be available to you.
Those with an IRA or 401(k) won’t be required to take a minimum distribution for 2020.
If you don’t necessarily need that money right now, it might be a good idea to let it sit in the account and wait for the markets to recover some of their losses.
Stay tuned and informed
While the government is doing all it can with the stimulus bill to help millions who are affected by COVID-19, the future is still uncertain.
Make sure to keep up with the news, as it changes daily. The U.S. Treasury Department is a good website to check for updates.
If you’re looking for more financial tips, ideas, and suggestions tailored to homeowners, check out our COVID-19 Financial Resource Guide for Homeowners.