FHA and GSEs Prolong Forbearance Coverage and Foreclosures Moratoriums | Weiner Brodsky Kider PC
FHA, Fannie Mae, and Freddie Mac recently released COVID-19 related updates regarding maintenance. The FHA published the 2021-15 Mortgage Letter, Freddie Mac published the 2021-23 Bulletin, and Fannie Mae updated the 2021-02 Lender Letter, all of which extend the previously announced moratoria on foreclosure through July 31, 2021 foreclosure actions, including foreclosure sales, initiating a judicial or extrajudicial enforcement proceedings and requests for a foreclosure judgment or a sale order. This restriction does not apply to mortgages on land that are considered empty or abandoned.
In ML 2021-15, the FHA also updated certain requirements and flexibilities regarding borrowers affected by COVID-19, including:
- Updated the FHA’s forbearance policy by extending the date for requesting an initial forbearance to September 30, 2021 so that between July 1, 2021 and September 30, 2021 (i) borrowers requesting an initial COVID-19 forbearance will be able to mostly a six month forbearance or suspension of payments, and (ii) borrowers starting their initial forbearance will receive an additional three month extension of the COVID-19 forbearance;
- Introducing a new COVID-19 early loan modification policy that obliges mortgage loans to screen eligible borrowers for a permanent change in one or more terms of the borrower’s mortgage that results in a reduction in the borrower’s monthly principal and interest payment by at least 25%, which does not require borrower contact; and
- Extending the deadline to September 30, 2021 for HECM borrowers to request an extension before the servicer can apply for the loan to mature so that between July 1, 2021 and September 30, 2021 (i) borrowers who have a the initial extension will be extended for a maximum of six months; and (ii) Borrowers whose initial HECM extension period begins between July 1, 2020 and September 30, 2020 will receive an additional three-month extension.
Additionally, in LL-2021-02, Fannie Mae also addressed the gap between the expiration of the foreclosure moratorium (i.e. July 31, 2021) and August 31, 2021, the effective date of the recently enacted final CFPB rule entitled “Protection for Affected Borrowers “one by the COVID-19 emergency under the Real Estate Settlement Act” (the “Final Rule”). The Final Rule will, among other things, establish certain temporary procedural safeguards to ensure that borrowers have a meaningful opportunity to be screened for loss mitigation before servicers initiate initial notice or filing for foreclosure of certain mortgages; and (ii) service providers Temporarily allow borrowers affected by COVID-19 hardship to offer certain loan modifications based on the assessment of an incomplete application. In LL-2021-02, Fannie Mae prohibits servicers from taking any action between July 31, 2021 and August 31, 2021 that would violate the definitive rule if it were in effect during that period.
Finally, LL-2021-02 also announces updated rules on the suspension of foreclosure activities and filing requests for exemption from automatic suspension in certain bankruptcy cases.
Check out WBK’s previous coverage of the moratoria on foreclosure here.