Governor Cuomo has just signed into law the forbearance bill which expands much needed protection for homeowners who were affected by COVID-19.  Similar to the federal CARES Act, the law now mandates state regulated mortgage lenders to provide homeowners who suffered a hardship as a result of the pandemic with forbearance for up to six months renewable for an additional six months.

Prior to the new law, only homeowners with federally-backed mortgages insured or backed by FHA, VA, Fannie Mae or Freddie Mac were eligible for the expanded forbearance option which for its duration suspends or reduces all mortgage payments that would otherwise be due.  Homeowners with mortgages not federally-backed but regulated by the state were only eligible for forbearance up to three months and some lenders would ask to recoup the suspended mortgage payments as a lump sum, an option not affordable for most homeowners.

The new state law, similar to the federal CARES Act, now provides options for recoupment of the suspended payments that are affordable for homeowners.  Such options include extending the loan term by the duration of the forbearance, stretching repayment for the term of the loan, negotiating a loan modification or deferring the suspended payments as a non-interest bearing balloon to the end of the loan term.

Homeowners are eligible for forbearance regardless of whether they were behind on their mortgage payments, had entered into a trial period plan or had applied for loss mitigation such as a loan modification during the covered period, defined as having started March 7, 2020.  Lenders are barred from negatively reporting forbearance and its repayment options to any credit bureau.   Lenders’ failure to comply with this law can be a defense to foreclosure.

Legal Service providers including The Legal Aid Society are ready to assist homeowners in obtaining COVID-19 mortgage relief as well as answering questions. 

The Legal Aid Society can be reached at the following helplines:

Queens: (718) 298-8979 and Bronx (646) 340-1908.