Sorting out the mortgage forbearance and foreclosure deadlines

If you are having trouble keeping track of all the moving deadlines when it comes to forbearance and foreclosure moratoriums, you are not alone. Hardly a day goes by where one of our clients doesn’t have a question about the timing of various federal and state deadlines, what each update means in terms of the length of forbearance that must be offered, when they should start contacting borrowers and which set of rules — federal or state — must be followed.

Here’s just a quick overview of where things stand at the beginning of June.

The Coronavirus Aid, Relief, and Economic Security Act (CARES) Act
The foreclosure moratorium initially introduced in the CARES Act was effective through May 17, 2020. Since then, we have seen multiple extensions, including the Consumer Financial Protection Bureau’s proposed extension that would go until 2022.

Since the CARES Act, Fannie Mae and Freddie Mac have extended their foreclosure and eviction moratoriums seven times. The Federal Housing Administration, the Veterans Administration and the United States Department of Agriculture have extended their foreclosure and eviction moratoriums five times. Currently, all of these extensions are due to expire on June 30, 2021. Although they are not required to do so, most private-label investors have generally followed the agencies’ lead on this issue.

Nine states have passed legislation protecting either homeowners or renters (or both) against foreclosure or eviction proceedings, respectively. Some states have subsequently extended their moratoriums, and several have proposed legislation that would impact the pre-foreclosure process. For example, on June 1, 2021 Governor Kate Brown of Oregon signed OR House Bill 2009, providing temporary foreclosure protections for borrowers. The bill creates a foreclosure moratorium ending June 30, 2021 but allows the Governor to extend the order through September 30, 2021 and again through December 21, 2021.

In addition, on May 4, 2021, Governor Andrew Cuomo in New York signed into law an extension of the COVID-19 Emergency Eviction and Foreclosure Protection Act of 2020. It was first enacted last December and initially expired on May 1, 2021. It requires servicers to include a Hardship Declaration with every 90-day pre-foreclosure notice they send to borrowers. Borrowers who return a signed Hardship Declaration are entitled to a moratorium on foreclosures through August 31, 2021. Servicers need to update their declarations and the required translations with this new date.

Who’s entitled to what and for how long?
Forbearance timelines have been challenging to track as each entity has been updating their requirements at different times, with different deadlines. For loans backed by the FHA, USDA or VA, the deadline for requesting an initial forbearance is June 30, 2021. There is no deadline to request an initial forbearance for the GSEs.

For FHA, USDA and VA, borrowers can request up to a maximum of 18 months of forbearance, but only if they initially requested forbearance on or before June 30, 2020. Borrowers who requested forbearance after June 30, 2020 are only entitled to the original 12-month forbearance. However, for the GSEs, borrowers who entered into a forbearance plan by February 28, 2021 are eligible for up to 18 months of forbearance. So, a borrower who entered into a forbearance plan on February 28, 2021 could conceivably remain in forbearance through August 28, 2022.

Borrowers may be eligible for a second COVID-19 forbearance plan if they meet the initial deadline criteria and have not previously used all of their allowable forbearance time.

Getting ready to get ready
In March 2021, the CFPB rescinded their policy statements on supervisory and enforcement practices that provided flexibility in response to challenges brought on by the pandemic. Soon after, in April, the agency warned servicers that being “unprepared is unacceptable” and said servicers are expected to plan for an increase in loss mitigation applications and dedicate sufficient resources to ensure they can manage borrower requests for assistance.

As of this publishing date, it is still uncertain as to whether the June 30, 2021 deadline for initial forbearance requests for the FHA, VA and USDA will be extended or whether the GSEs will establish a deadline to request an initial forbearance. Though, based on what the agencies have done to date, it would hardly be a surprise to see a further extension or adjustments to available COVID-19 relief options. So don’t mark your calendars in ink just yet.

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