The federal foreclosure moratorium has been extended to the end of July to help millions of Americans facing financial hardship due to the COVID-19 pandemic stay in their homes. In addition, new rules released by the Consumer Financial Protection Bureau look to further protect homeowners from foreclosure through the end of the year.
CFPB’s rules, which go into effect Aug. 31, place restrictions on banks trying to foreclose on homes whose owners were not already in delinquency at least 120 days prior to the pandemic. Under these new rules, it is difficult but not impossible for foreclosures to occur before Dec. 31, says C. Scott Canady of Tambala Strategy.
Canady adds that a mortgage provider must show it has complied with all current servicing regulations on foreclosures and that one of three conditions exists:
- The borrower was offered a loss mitigation option and either refused to participate or failed to meet the terms of the loss mitigation plan.
- The property is abandoned, and the local government considers it abandoned.
- The borrower was unresponsive or evaded the mortgage provider’s attempt to make contact during the 90-day period prior to a foreclosure referral.
CFPB’s temporary rules exempt mortgage providers if the foreclosure referral occurs after Dec. 31, the borrower was more than 120 days delinquent prior to March 1, 2020, or if an applicable statute of limitations granting the borrower rights under state or local law expires.
For the most part, community associations have so far largely avoided major financial impacts stemming from the COVID-19 pandemic. On average, 91% of homeowners were current in their assessment payments between February 2020 and February 2021, according to an ongoing CAI survey measuring assessment delinquencies.
On average, 5% of respondents reported that homeowners were 31–60 days delinquent in paying assessments, 3% said they were around 61–90 days delinquent, and 5% said they were more than 90 days delinquent over the 12-month period.
Dawn Bauman, CAE, CAI’s vice president of government and public affairs, anticipates that the financial impact of the pandemic will surface in community associations after the foreclosure moratorium expires. “If history informs when community association assessments will be impacted, it will follow mortgage delinquencies,” she notes.
In the past year, CAI has advocated for initiatives that support housing security in community associations during the pandemic. In March, the American Rescue Plan Act included assessments as eligible housing expenses under the Homeowner Assistance Fund.
The foreclosure moratorium has been in place since March 2020 for the three federal agencies that back mortgages—the Department of Housing and Urban Development, Department of Veterans Affairs, and Department of Agriculture. The Federal Housing Finance Agency also extended the foreclosure moratorium for mortgages backed by Fannie Mae and Freddie Mac until July 31.
Once the moratoria end, HUD, VA, and USDA will take additional steps to prevent foreclosures on mortgages backed by those agencies until borrowers are reviewed for COVID-19 streamlined loss mitigation options that are affordable, while FHFA will continue to work with Fannie Mae and Freddie Mac to ensure that borrowers are evaluated for home retention solutions prior to any referral to foreclosure.
In addition, HUD, VA, and USDA will continue to allow homeowners to enter into COVID-19-related forbearance through Sept. 30 if they have not taken advantage of the benefit and will be announcing additional steps in July to offer borrowers payment reduction options. Homeowners with federally backed mortgages from Fannie Mae or Freddie Mac facing COVID-19-related hardship will remain eligible for COVID-19-related forbearance.