The foreclosure moratorium and forbearance allowances continue to be extended across the country because of challenges faced by many Americans during the pandemic. Here's what you need to know about what the current regulations look like.
- The CARES Act first created the protections in March 2020
- Foreclosure moratoriums for government, Freddie Mac, and Fannie Mae mortgages continue to be extended
- Government loans are now protected until June 30, 2021
- Fannie Mae and Freddie Mac borrowers are protected until March 31, 2021
- COVID-19 payment deferrals will also help borrowers recover
When the COVID-19 pandemic first caused shutdowns and restrictions in early 2020, eviction and foreclosure moratoriums were put in place to help renters and homeowners who may have lost their jobs or are struggling to pay their bills during the crisis.
In December 2020, 5 million American households didn't make their rent or mortgage payments, and millions of borrowers still fear that they're at risk of foreclosure. These hardships come as the pandemic has caused record unemployment claims, layoffs, and business closures around the country.
When the first relief bill was passed in 2020, the government put protections in place for renters and homeowners to help them maintain their housing. Let's look at what these measures covered and the current state of these programs.
Background and current status of the pandemic-related moratoriums
The Coronavirus Aid, Relief, and Economic Security Act (CARES) passed in March 2020 included protections for renters and homeowners. Borrowers with mortgages from the federal government, Fannie Mae, or Freddie Mac were protected against foreclosure and they could request COVID-19 hardship mortgage forbearances from their lenders.
These measures were initially in place for 60 days under the CARES Act and then extended multiple times throughout the year until December 31, 2020.
The Federal Housing Finance Agency (FHFA) then announced an extension to all of these moratoriums until the end of March 2021. In mid-February, the government announced that eviction and foreclosure moratoriums on USDA Single Family Housing Direct and Guaranteed Loans would be extended through June 30, 2021. This covers loans backed by HUD/FHA or VA as well.
Homeowners with mortgages backed by Fannie Mae or Freddie Mac are still protected from foreclosure until March 31, 2021.
Who is covered by the moratoriums?
For loans backed by Freddie Mac and Fannie Mae, protections cover single-family foreclosures and real estate owned (REO) evictions. The foreclosure moratorium only protects enterprise-based, single-family mortgages, and the REO eviction moratorium protects enterprise-acquired properties through foreclosure or deed-in-lieu of foreclosures.
But homeowners with these mortgages may also be able to request forbearance extensions for up to three months, for a maximum of 15 months of total forbearance, as long as they are on a COVID-19 forbearance plan as of February 28, 2021.
For loans backed by HUD/FHA, USDA, or VA, homeowners can request forbearance until June 30, 2021, and lenders cannot foreclose on them until after that date. They can request up to two three-month extensions with a maximum of 18 months of total forbearance.
This means lenders and loan servicers cannot begin a judicial or non-judicial foreclosure against borrowers or finalize a foreclosure judgment or sale. These restrictions were first put in place in March 2020 and have since been prolonged by the aforementioned extensions.
What does forbearance mean?
Under these guidelines, forbearance means that a foreclosure is delayed, even though the homeowner is not making on-time payments. Borrowers must request forbearance related to a COVID-19 hardship – they do not happen automatically.
Payments are not forgiven during COVID-19 forbearance, and borrowers are still expected to pay back any payments they missed or paid at a lower amount. When the forbearance period ends, lenders will likely notify borrowers how to repay the missed payments. Usually, the amount will not have to be paid back all at once.
If you start receiving normal income again during the protected period, it is wise to begin making payments again since they will have to be made up anyway.
What is a COVID-19 payment deferral?
Fannie Mae and Freddie Mac announced that they will further help borrowers once their COVID-19 forbearance ends or they resolve their financial hardships. The initiative is called COVID-19 payment deferral, and it defers the amount borrowers owe to the end of the loan term or the maturity date.
When homeowners make their last loan payment or pay off the loan, they will then pay the missed amount. Borrowers can take advantage of this deferral without being charged interest on the amount owed, and they don't have to go through a trial period.
As long as the loan was covered by the CARES Act, it should be reported as current if the borrower had been current before their forbearance plan and they made the required payments under the forbearance plan.
This payment deferral option helps borrowers maintain the same mortgage payments they were making before the hardships created by COVID-19.
Working with a legal professional
Even with these government relief options for borrowers, managing your obligations during the pandemic can be stressful and challenging. You may not fully understand your rights or how to request forbearance from your servicer.
To ensure you are eligible for these protections and take all necessary steps, work with an attorney from PeytonBolin. We are always aware of changing laws and regulations and what they mean for our clients. We help you make sense of what's happening, so you're always the right things to get through the pandemic or any other hardships you face.
Contact the PeytonBolin team today to get started with a board-certified real estate lawyer. We offer free phone consultations to understand your situation and discuss how we can help.