LC CRS Reports – COVID 19: Consumer Loan Forbearance and Other Relief Options May 14, 2020: “A growing number of reported Coronavirus Disease 2019 (COVID-19)cases have been identified in the United States, significantly impacting many communities. This situation is evolving rapidly, and the economic impact has been large due to illnesses, quarantines, social distancing, local stay-at-home orders, and other business disruptions. Consequently, many Americans will lose income and face financial hardship due to the COVID-19 pandemic.
Many consumers may have trouble paying their loan obligations, such as mortgages, student loans, auto loans, and credit cards. Due to increasing hardship, loan forbearance has become a common form of consumer relief during the COVID-19 pandemic. Loan forbearance plans are agreements that allow borrowers to reduce or suspend payments for a short period of time, providing extended time for consumers to become current on their payments and repay the amounts owed. These plans do not forgive unpaid loan payments and tend to be appropriate for borrowers experiencing temporary hardship.Loan forbearance may become a less viable option to deal with the financial ramifications of COVID-19 if the pandemic causes prolonged disruptions,such as persistent elevated levels of unemployment or permanent business closures.A consumer’s ability to get a forbearance and under what terms may be significantly influenced by what type of institution owns the loan. These various institutions—including banks and credit unions, private nonbank financial institutions, government-sponsored enterprises (GSEs), and the federal government—are subject to different laws, regulations, and business considerations…”