CONSUMER: COVID-19

COVID–19 EMERGENCY

The term ‘‘COVID–19 emergency’’ means the national emergency concerning the novel coronavirus disease (COVID–19) outbreak declared by the President on March 13, 2020 under the National Emergencies Act (50 U.S.C. 1601 et seq.).

RELIEF FROM FORECLOSURE CARES ACT § 4022

Federal Foreclosure and Eviction Suspensions; Mortgage Loan Forbearance

Enacted on March 25th 2020, the CARES Act Relief from Foreclosure: CARES Act § 4022 provides foreclosure relief for “federally-backed loans,” which means loans (for 1–4 family properties) purchased, securitized, owned, insured, or guaranteed by Fannie Mae or Freddie Mac, or owned, insured, or guaranteed by  FHA, VA, or USDA.     About one-third of residential mortgages are not federally backed and thus not covered by the Cares Act. Although the possibility may exist in the future, CARE Does not revive all expired loan modification programs implemented after the financial crisis of 2008 like: TARP,  HAMP or HARP. However, the Bankruptcy court continue to operate the Mortgage Modification Program (MMM). Therefore, many homeowners (and tenants) will have to rely on their lenders and future federal action or state orders.

Under the CARES Act, a servicer of federally backed mortgage loan may not: initiate any judicial or nonjudicial foreclosure process, move for a foreclosure judgment, order a sale, or execute a foreclosure-related eviction or foreclosure sale.  The provision lasts for not less than the sixty-day period beginning on March 18, 2020.

Under the CARES Act, homeowners with federally backed mortgage loans affected by COVID-19 can request and obtain forbearance from mortgage payments for up to 180 days, and then request and obtain additional forbearance for up to another 180 days.  During a period of forbearance, no fees, penalties, or interest shall accrue on the borrower’s account beyond the amounts scheduled or calculated as if the borrower made all contractual payments on time and in full under the terms of the mortgage contract.  The covered period appears to be during the emergency or until December 31, 2020, whichever is earlier.

CARES Act Forbearance Rights for Owners of Multi-Family Properties (5 or more units) and Rights of Their Tenants: The Act provides for different forbearance rights for owners of multi-family property, and also provides that tenants are protected from eviction if the owner seeks such forbearance.

CARES Act Protections Against Eviction: During the 120-day period beginning on the Act’s enactment date, the lessor of a “covered dwelling” may not file a court action for eviction or charge additional fees for nonpayment of rent. See CARES Act § 4024(b).  After that 120-day period, the lessor cannot require the tenant to vacate until it gives the tenant a thirty-day notice to quit. See § 4024(c). Remember that a covered dwelling is one where the building is secured by a federally backed mortgage loan or participates in certain federal housing programs.

How to Determining if a Mortgage Loan Is Federally Backed:  

The CARES Act foreclosure and forbearance provisions apply in large part only to “federally backed mortgages.”  In addition, prior to CARES Act enactment different federally backed mortgage investors had announced different foreclosure policies   It is thus imperative to determine if a loan is federally backed and which investor is the backer: Fannie Mae, Freddie Mac, Federal Housing Administration (FHA), Veterans Affairs (VA), and the U.S. Department of Agriculture’s Rural Home Service (RHS).

The following tools let one quickly determine which investor backs a particular homeowner’s mortgage loan:

  • Fannie Mae and Freddie Mac have easy loan look-up websites to determine if they own a mortgage. See https://ww3.freddiemac.com/loanlookup/ and https://www.knowyouroptions.com/loanlookup#.
  • To determine if a loan is FHA-insured, look for an FHA case number on the mortgage document, specific language in the mortgage and note forms, or through the payment of an FHA premium on the mortgage statement. In some cases, unfortunately, loans may have been stripped of their FHA-insured status; call HUD’s National Servicing Center at 877-622-8525 if there are questions.
  • A VA-guaranteed loan also has specific language in the note and mortgage identifying it as a V A loan, and there are fees paid to the VA noted in closing documents.
  • While a borrower with a mortgage directly extended by the RHS will be very familiar with the agency, homeowners with privately serviced RHS-guaranteed loans often do not know the loan’s status. If an RHS-guaranteed loan is suspected, directly ask the servicer to review the homeowners’ closing documents.

Links to Foreclosure Suspensions by Federally Backed Mortgage Investors in Effect Prior to the CARE Act:

Federal Banking Agency Guidance on Mortgage Servicing and Loan Modifications

On March 22, 2020 Federal Reserve, FDIC, NCUA, OCC, CFPB, and the Conference of State Bank Supervisors have issued an Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus. We have yet to see how these programs will actually work. Therefore, having a well-informed legal team on your side, can help you stay ahead and on top of all these potentially complex opportunities,

Contact the Law Office of Pelayo Duran for immediate assistance with your mortgage loan modification needs.

 

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