The Effects of COVID-19 on Residential Mortgages | Burr & Forman
Amid a myriad of economic disruptions caused by the COVID-19 pandemic, mortgage lenders and service workers are struggling to adapt to new moratoria and regulations affecting residential mortgages.
First, pursuant to an order of March 18, 2020 from the Federal Housing Finance Agency and the Coronavirus Assistance, Relief and Economic Security Act (“CARES Act”) promulgated by President Trump, it administrators of federally guaranteed mortgages are prohibited from initiating judicial or non-judicial foreclosure proceedings, seeking entry of a foreclosure judgment or order directing the completion of a foreclosure sale, or enforcing an eviction or a foreclosure sale related to foreclosure. This moratorium affects approximately 28 million federally guaranteed mortgages, which are residential mortgages purchased or securitized by Fannie Mae or Freddie Mac, guaranteed or insured by the Federal Housing Authority or the Veterans Administration, or made by the Department of Agriculture. Currently, the moratorium expires on May 17, 2020.
The CARES Act also allows homeowners to apply for forbearance on federally guaranteed mortgages for up to 180 days. To obtain such forbearance, borrowers must, regardless of their delinquency state, submit a request to the loan manager, which may be oral, written or otherwise. The borrower must certify that he is experiencing financial hardship caused by the COVID-19 pandemic, but is not required to provide additional documents on the hardship. Upon receipt of the borrower’s request and attestation, the serving agent must provide a forbearance of up to 180 days, which can only be shortened at the borrower’s request. An extension of the forbearance for an additional 180 days must also be granted if the borrower requests it. Although the CARES Act stipulates that such abstentions must be granted during the “covered period”, it does not define the term “covered period”. Presumably, the term “period covered” refers to the time until the end of the national emergency declared by the federal government.
In addition to the moratoriums and relief granted at the federal level, some states are also implementing laws affecting residential mortgages. In New York City, an executive order issued by Governor Cuomo requires any bank subject to the Department of Financial Services (“DFS”) to provide 90-day abstentions to individuals and businesses facing financial hardship caused by COVID-19. This executive order is scheduled to expire on April 20, 2020. DFS regulations implementing the executive order require institutions to apply for forbearance on any property owed on a “widely available” residential mortgage for New York residents who demonstrate hardship. financial due to the pandemic. In addition to New York, various seizure and / or deportation controls or moratoria are in place in Alabama, Alaska, California, Colorado, Delaware, District of Columbia, Kansas, Kentucky, Maine, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Carolina, Oregon, South Carolina and Washington.
Even some local governments have taken similar steps to impose a moratorium or restrictions on foreclosures and / or evictions. These cities include Atlanta, Austin, Cleveland, Detroit, Miami, Philadelphia, San Antonio, Santa Fe, and Seattle.
In light of the ever-changing landscape surrounding the COVID-19 pandemic, operators must continue to closely monitor the latest laws and regulations imposing mandatory forbearance and temporary foreclosure stays.