The Consumer Financial Protection Bureau (CFPB) issued a notice on April 5 proposing an Amendment to Regulation X that would require a temporary COVID-19 emergency pre-foreclosure review period until December 31, 2021, for principal residences. This amendment would, in effect, stall foreclosures on principal residences until January of 2022. The press release, which can be read here, requests public comments on the proposal through May 10, 2021.
The press release states nearly three million borrowers are delinquent in mortgage payments and nearly 1.7 million will exit forbearance programs in September and the following months. The rule proposes to give these borrowers a chance to explore ways to resume making payments and to permit servicers to offer streamlined loan modification options to borrowers with COVID-related hardships.
Under current rules, borrowers must be 120 days delinquent before the foreclosure process can begin. Anticipating a wave of new foreclosures, the CFPB seeks to provide borrowers more time for the opportunity to be evaluated for loss mitigation.
Many provisions of the CARES Act apply only to federally backed mortgages, but the CFPB seeks, by this proposed rules change, to set a blanket standard across the mortgage industry.
The U.S. Department of Housing and Urban Development has extended COVID-19 foreclosure and forbearance moratoriums through June 30, 2021. It also extended the deadline for the first legal action and the reasonable diligence time frame to 180 days.
COVID-19 forbearance was also extended to allow up to two forbearance extensions of up to three months each for homeowners who requested a forbearance on or before June 30, 2020. These extensions are intended to provide relief to homeowners who will be nearing the end of their maximum 12-month forbearance period and have not yet stabilized their financial situation.
FHA’s streamlined COVID-19 loss mitigation home retention and home disposition options were extended to all homeowners who are behind on their mortgage payments by at least 90 days.
Diana Hoffman, Corporate Escrow Administrator with Fidelity recently wrote an excellent article about mortgage forbearance that I previously shared on this blog and am now sharing again with South Carolina closing attorneys in its entirety:
“Forbearance does not erase what the borrower owes. The borrower will have to repay any missed or reduced payments in the future. Borrowers able to keep up with their payments should continue to make payments. The types of forbearance available varies by loan type.
At the end of the forbearance, the borrower’s options can include paying their missed payments:
At one time
Spread out over a period of months
Added as additional payments, or
Added as a lump sum at the end of their mortgage
The CARES Act requires servicers to grant forbearance up to 180 days, with a one–time extension of 180 days for borrowers experiencing a hardship due to COVID–19 issues, such as, loss of income, unemployment, illness or caring for a sick relative.*
The CARES Act also provides protection against derogatory marks against the borrower’s credit. However, the servicer can report notes to the credit bureau that can be seen by any future creditor that could prevent the borrower from obtaining any type of new financing for a 12–month period.
When the Federal Housing Finance Agency reports servicers who collect payments on mortgages backed by Fannie Mae and Freddie Mac, they will only be required to cover four months of missed payments on loans in forbearance.
The big question is what happens when that four–month period is over? As it turns out, the Government Sponsored Entities (GSEs) themselves are preparing to cover any remaining advances for as long as those loans remain in forbearance.
What does this mean to the title industry? To prevent payoff losses due to deferred payments, settlement agents should:
Ask borrowers if they have entered into a forbearance or loan modification agreement with their lender at the opening of the transaction
Review the preliminary report or commitment for title insurance for junior liens, securing the deferred payments
Ensure the payoff request includes the following language:
Please furnish to us a statement of the amount necessary to pay in full including any amounts deferred due to a forbearance or modification agreement. If the borrower entered into a forbearance agreement and you are not the entity servicing any deferred amounts, please provide the contact information for the entity who is.
Review the payoff statement for deferred principal balance amounts
The last item is important. If the deferred amounts are not contained in the payoff statements, it is likely the amounts are being serviced by another loan servicer and a separate payoff statement will need to be requested”
*See above in the main article. Two extensions are now allowed.
South Carolina launched a funded rental and mortgage assistance program
South Carolina’s Housing Authority announced last week a new funded program to assist residents who face financial difficulty in housing as a result of the pandemic.
The program, called SC Stay, has $25 million to be provided on a first-come, first-serve basis to qualified residents for rent and mortgage deficits dating back to February of 2020. Residents may receive up to a total of $7,500 for prior and/or future mortgage or rent payments. The funding is provided through the U.S. Department of Housing and Urban Development’s Community Development Block Grant Program for Coronavirus and is a part of the CARES Act.
Demonstrate that they are unable to make all or part of their rent or mortgage payments or are behind on those payments because of circumstances stemming from COVID. Those circumstances may include layoffs, reduced work hours as well as the inability to work because of infection and quarantine.
Have landlord or lender confirmation of their past-due payments and willingness to accept payments on behalf of the tenant or borrower.
On Tuesday, September 1, the CDC announced a temporary eviction moratorium through December 31, 2020. The order applies to all rental units nationwide and goes into effect immediately. Treasury Secretary Steven Mnuchin said that the order applies to around 40 million renters.
The CDC announced the action was needed to stop the spread of the coronavirus and to avoid having renters wind up in shelters or other crowded living conditions. This order goes further than the eviction ban under the CARES Act which covered around 12.3 million renters in apartment complexes of single-family homes financed with federally backed mortgages.
The Order, entitled, “Temporary Halt in Residential Evictions to Prevent the Further Spread of COVID-19, does not suspend mortgage foreclosures. To take advantage of the suspension, the tenant must sign a declaration form alleging:
The individual has used best efforts to obtain all available government assistance for rent or housing;
The individual either (i) expects to earn no more than $99,000 in annual income for Calendar Year 2020 (or no more than $198,000 if filing a joint tax return), (ii) was not required to report any income in 2019 to the U.S. Internal Revenue Service, or (iii) received an Economic Impact Payment (stimulus check) pursuant to Section 2201 of the CARES Act;
The individual is unable to pay the full rent or make a full housing payment due to substantial loss of household income, loss of compensable hours of work or wages, a lay-off, or extraordinary out-of-pocket medical expenses;
The individual is using best efforts to make timely partial payments that are as close to the full payment as the individual’s circumstances may permit, taking into account other nondiscretionary expenses; and
Eviction would likely render the individual homeless— or force the individual to move into and live in close quarters in a new congregate or shared living setting— because the individual has no other available housing options.
The order specifically does not excuse rent, it just delays eviction. There is a substantial body of depression -era caselaw that holds this type of governmental action is permissible because it does not impair the contract, it only delays the remedy, and it is not a taking because the rent is still due. Lawsuits are likely to follow regardless of this old caselaw.
Many would argue that a temporary ban on eviction for non-payment burdens landlords with the cost of rental delay. Many landlords are individuals or small businesses that cannot spread the losses and cannot pay maintenance costs, mortgages and property taxes without the benefit of rental income.
Diana Hoffman, Corporate Escrow Administrator with our company recently wrote an excellent article about mortgage forbearance that I am sharing with South Carolina closing attorneys in its entirety:
“Forbearance does not erase what the borrower owes. The borrower will have to repay any missed or reduced payments in the future. Borrowers able to keep up with their payments should continue to make payments. The types of forbearance available varies by loan type.
At the end of the forbearance, the borrower’s options can include paying their missed payments:
At one time
Spread out over a period of months
Added as additional payments, or
Added as a lump sum at the end of their mortgage
The CARES Act requires servicers to grant forbearance up to 180 days, with a one–time extension of 180 days for borrowers experiencing a hardship due to COVID–19 issues, such as, loss of income, unemployment, illness or caring for a sick relative.
The CARES Act also provides protection against derogatory marks against the borrower’s credit. However, the servicer can report notes to the credit bureau that can be seen by any future creditor that could prevent the borrower from obtaining any type of new financing for a 12–month period.
When the Federal Housing Finance Agency reports servicers who collect payments on mortgages backed by Fannie Mae and Freddie Mac, they will only be required to cover four months of missed payments on loans in forbearance.
The big question is what happens when that four–month period is over? As it turns out, the Government Sponsored Entities (GSEs) themselves are preparing to cover any remaining advances for as long as those loans remain in forbearance.
What does this mean to the title industry? To prevent payoff losses due to deferred payments, settlement agents should:
Ask borrowers if they have entered into a forbearance or loan modification agreement with their lender at the opening of the transaction
Review the preliminary report or commitment for title insurance for junior liens, securing the deferred payments
Ensure the payoff request includes the following language:
Please furnish to us a statement of the amount necessary to pay in full including any amounts deferred due to a forbearance or modification agreement.
If the borrower entered into a forbearance agreement and you are not the entity servicing any deferred amounts, please provide the contact information for the entity who is.
Review the payoff statement for deferred principal balance amounts
The last item is important. If the deferred amounts are not contained in the payoff statements, it is likely the amounts are being serviced by another loan servicer and a separate payoff statement will need to be requested”
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