What Options Do Homeowners Have to Avoid Foreclosure Due to COVID-19?

 Posted on July 15, 2021 in Foreclosure

For over a year, people throughout the United States have experienced multiple types of financial difficulties. Many families have had to deal with health issues related to COVID-19, resulting in large medical bills and affecting people’s ability to work and earn an income. Others have suffered job losses or decreases in work hours and income due to pandemic-related business closures. These financial problems have caused some families to be unable to cover their ongoing expenses, including mortgage payments. While many homeowners have been protected from foreclosure by a moratorium put in place by the federal government, this moratorium is coming to an end on July 31, 2021. However, federal agencies have implemented new rules and procedures that may help homeowners avoid the loss of their homes.

Lenders Required to Provide Borrowers With Options to Avoid Foreclosure

For mortgages that are backed by the federal government, including through agencies such as the Department of Housing and Urban Development (HUD), the Department of Agriculture (USDA), Fannie Mae, and Freddie Mac, the Consumer Financial Protection Bureau (CFPB) has implemented a new rule to provide homeowners with protections during foreclosure proceedings. Under this rule, most lenders will be unable to initiate foreclosure proceedings prior to December 31, 2021, and they must meet certain requirements before doing so.

Lenders must determine whether borrowers are eligible for affordable loss mitigation options that will allow them to continue living in their homes. Any homeowners who have not yet taken advantage of their ability to receive a forbearance on missed mortgage payments will be allowed to do so prior to September 30, 2021. Those who have already received a forbearance may be eligible to continue their forbearance based on hardships related to COVID-19. Homeowners who receive a forbearance may have missed payments added to the end of their loans, or they may be able to work with lenders to find ways to make up these payments.

Before proceeding with a foreclosure, lenders are also required to provide homeowners with payment reduction options. These include loan modifications that would either reduce the total amount owed or the amount of a borrower’s monthly payments. However, there are certain limits on the types of loan modifications that can be made. The term of a loan cannot be extended for more than 40 years following the date of the loan modification, a borrower’s monthly payments cannot be increased above what they paid prior to the modification, and interest cannot be applied to delayed payments. In addition, lenders cannot charge fees for these types of loan modifications, and certain types of existing fees must be waived, including late fees and penalties that accrued after March 1, 2020.

Contact Our Kerrville Foreclosure Defense Attorney

At the Law Offices of Chance M. McGhee, we understand the difficulties that many homeowners have faced during the pandemic, and we are prepared to help you determine your options for regaining financial stability and avoiding the loss of your home. To get legal help with foreclosure, bankruptcy, or related issues, contact our Boerne bankruptcy and foreclosure lawyer at 210-342-3400 and arrange a free consultation.

Sources:

https://www.whitehouse.gov/briefing-room/statements-releases/2021/06/24/fact-sheet-biden-harris-administration-announces-initiatives-to-promote-housing-stability-by-supporting-vulnerable-tenants-and-preventing-foreclosures/

https://files.consumerfinance.gov/f/documents/cfpb_covid-mortgage-servicing-rule_executive-summary_2021-06.pdf

https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Protects-Borrowers-After-COVID-19-Foreclosure-and-REO-Eviction-Moratoriums-End.aspx