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NCLC’s Mortgage Servicing and Loan Modifications Chapter 12, free to the public for a limited time, has just been extensively updated to cover the latest changes as to homeowner rights to delay and modify mortgage payments because of either the COVID-19 pandemic or in the wake of natural disasters. This article rapidly links readers to the pinpoint subsections they need to understand the rights of specific homeowners—based on their specific type of mortgage and their financial circumstances.

This article updates a prior article appearing on February 8, and its use is essential to understanding the recent changes in homeowner rights. All cites in this article (unless otherwise indicated) are to NCLC’s Mortgage Servicing and Loan Modifications Chapter 12. The public can view the cited subsections by clicking on the relevant links.

Updates to Mortgage Servicing and Loan Modifications Chapter 12

NCLC’s Mortgage Servicing and Loan Modifications Chapter 12 is and will continue to be updated as investor policies change. This chapter is presently open to the public and contains with the very latest federal investor changes in policy in response to the COVID-19 pandemic, including:

  • • Fannie Mae and Freddie Mac June 30, 2021, policy updates regarding Flex Modification interest rates;
  • • FHA Mortgagee Letters 2021-15 (June 25, 2021), 2021-18 (July 23, 2021), and 2021-24 (Sept. 27, 2021);
  • • VA’s revision to its COVID-19 loss mitigation options found in VA Circular 26-21-13 (July 23, 2021); and
  • • USDA’s updated COVID-19 relief options.

NCLC’s Mortgage Servicing and Loan Modifications Chapter 12 also covers state-based actions to protect homeowners during the pandemic and provides advice for homeowner protections where mortgages are not backed by any of the five federal investors, and where CARES Act protections do not apply. In addition, the chapter was also recently expanded to provide an extensive discussion of homeowner rights during natural disasters.

NCLC’s Summary of Foreclosure Alternatives for Borrowers with COVID-19 Hardships chart has also been updated, providing a useful and brief summary of the protections that apply for federally backed mortgages.

Pandemic-Related Strategies for Defending Foreclosures

Another NCLC treatise, Home Foreclosures examines in detail COVID-19-related moratoria on foreclosures, and also contains an important discussion of defending against foreclosure based on a servicer’s noncompliance with the pandemic-related protections described later in this article. See NCLC’s Home Foreclosures § 5.13a.5, Strategies to Challenge a Foreclosure As a Violation of Pandemic-Related Protections. (Home Foreclosures requires a subscription.)

Overview of Information Found in Mortgage Servicing and Loan Modifications Chapter 12

NCLC’s Mortgage Servicing and Loan Modifications § 12.3.1 provides pointers for how a practitioner can help a homeowner exercise new rights during the pandemic. Section 12.3.2 is an overview of new homeowner rights. Section 12.3.3 details forbearance rights provided by the 2020 CARES Act: timing, coverage, avoidance of any application requirement, mandatory approval, length, and terms.

The updated chapter then explores the additional and more detailed current rights as set out by the five federal investors that back most American mortgages:

  • • Fannie Mae;
  • • Freddie Mac;
  • • Federal Housing Administration (FHA);
  • • Veteran’s Administration (VA);
  • • Rural Housing Service (RHS) (within the Department of Agriculture).

These rights relate to foreclosure moratoria, forbearance of mortgage payments, and homeowner options coming out of a forbearance period.

Information on how to determine which of these five investors is applicable to an individual homeowner’s mortgage loan is provided at NCLC’s Mortgage Servicing and Loan Modifications § 12.3.1.

Chapter 12 details homeowner rights separately for each investor, which is a necessary analysis as COVID-19-related rights are different for each type of investor-backed mortgage loan. The chapter also addresses advice for homeowners where a mortgage loan is not backed by one of these five federal investors and examines additional state-based protections.

Fannie Mae Mortgage Loans

For Fannie Mae mortgage loans, the analysis covers the following homeowner rights:

  • • The now-expired foreclosure moratorium, at § 12.3.4.2;
  • • Mortgage forbearance, at § 12.3.4.3.1;
  • • Options coming out of forbearance, at § 12.3.4.3.2;
  • • The post-forbearance COVID-19 deferral, at §§ 12.3.4.3.3, 12.3.4.3.4;
  • • The post-forbearance Flex Modification in the COVID-19 context, including the June 30, 2021, updates to the COVID-19 Flex Modification policy, at § 12.3.4.3.5.

Freddie Mac Mortgage Loans

For Freddie Mac mortgage loans, the analysis covers the following homeowner rights:

  • • The now-expired foreclosure moratorium, at § 12.3.5.1;
  • • Mortgage forbearance, at § 12.3.5.2.1;
  • • Options coming out of forbearance, at § 12.3.5.2.2;
  • • The post-forbearance COVID-19 deferral, at § 12.3.5.2.3;
  • • The post-forbearance Flex Modification in the COVID-19 context, including the June 30, 2021, updates to the COVID-19 Flex Modification policy, at § 12.3.5.2.4.

Federal Housing Administration (FHA) Mortgage Loans

For Federal Housing Administration (FHA) insured mortgage loans, the analysis covers the following homeowner rights:

  • • The now-expired foreclosure moratorium, at § 12.3.6.2;
  • • Mortgage forbearance, including the recent extension of the deadline to start initial forbearance plans, at § 12.3.6.3;
  • • Options coming out of forbearance, at § 12.3.6.4;
  • • The post-forbearance COVID-19 Advance Loan Modification, which was released through Mortgagee Letter 2021-15, at § 12.3.6.4.2a;
  • • The post-forbearance COVID-19 Standalone Partial Claim, at § 12.3.6.4.3a;
  • • The post-forbearance COVID-19 Recovery Modification, at § 12.3.6.4.4.

Department Veterans of Affairs (VA) Mortgage Loans

For Department of Veterans Affairs (VA) mortgage loans, the analysis covers the following homeowner rights:

  • • The now-expired foreclosure moratorium, at § 12.3.7.2;
  • • Mortgage forbearance, including the recent extension of the deadline to start initial forbearance plans, at § 12.3.7.3;
  • • VA’s revised options for borrowers coming out of forbearance as outlined in VA Circular 26-21-13, at § 12.3.7.4.

U.S. Department of Agriculture (USDA) Mortgage Loans, Through Its Rural Housing Service (RHS)

For U.S. Department of Agriculture (USDA) mortgage loans, through its Rural Housing Service (RHS), the analysis covers the following homeowner rights:

  • • The now-expired foreclosure moratorium, at § 12.3.8.2;
  • • Mortgage forbearance, including the recent extension of the deadline to start initial forbearance plans, at § 12.3.8.3;
  • • USDA’s revised options for borrowers coming out of foreclosure coming out of forbearance, at § 12.3.8.4.

State-Based COVID Relief

It is important to explore state-based mortgage relief for two reasons. First, many mortgage loans do not fall under the five categories of federal investors described above, and in some cases state rights will apply to such loans. Second, states may actually provide rights beyond those offered by the five federal investors.

NCLC’s Mortgage Servicing and Loan Modifications § 12.3.9 contains an overview of state rights that originate from state legislatures, governor’s offices, and state regulatory agencies. In many instances the relief has been limited to imposing moratoria on foreclosure activities. See § 12.3.9.2. However, several states have gone further and have established substantive forms of relief for borrowers, including forbearance and post-forbearance options. See § 12.3.9.3.

Portfolio and Private Label Securities

CARES Act mortgage loan protections generally apply only to loans backed by the five federal investors described above. Many other mortgage loans are not covered, including loans in lender portfolios or in private label securities (PLS). Section 12.3.10 provides advice—for these other mortgage loans—on how a consumer advocate or homeowner can press for similar rights during the COVID-19 pandemic as set out by the federal investors.

Other Chapters of Mortgage Servicing and Loan Modifications

Updated Chapter 12 on protections during the COVID pandemic supplements the other chapters of NCLC’s Mortgage Servicing and Loan Modifications, available as a digital-only or a print+digital subscription. This treatise covers all aspects of mortgage servicing and loan modifications, including:

  • • Loan servicer procedures, incentives, and abuses;
  • • Analyzing a servicing case;
  • • Using RESPA discovery and dispute rights;
  • • RESPA, TILA, other federal rights dealing with servicers;
  • • State law protections and a state-by-state analysis of state mortgage servicing laws;
  • • Litigation with mortgage servicers, with sample pleadings;
  • • Loss mitigation basics;
  • • Fannie Mae, Freddie Mac, FHA, VA, and RHS loss mitigation programs;
  • • Pursuing loss mitigation rights through litigation.

Home Foreclosures as a Companion Treatise

Mortgage Servicing and Loan Modifications covers homeowner rights prior to initiation of a foreclosure. A companion treatise, NCLC’s Home Foreclosures, also available as a digital-only or print+digital subscription, picks up where Mortgage Servicing and Loan Modifications leaves off:

  • • Who has legal authority to foreclose and the role of MERS;
  • • Procedural and substantive foreclosure defenses;
  • • Special issues with Fannie Mae, Freddie Mac, FHA, VA, and RHS foreclosures;
  • • Foreclosure litigation and sample pleadings;
  • • Using bankruptcy to stop foreclosures;
  • • Rights after the foreclosure sale;
  • • Unique 50-state, state-by-state summaries of judicial and non-judicial foreclosure laws, state laws on tax abatement rights and tax liens, and state laws on reverse mortgages.

Special chapters cover special types of foreclosures:

  • • Reverse mortgages including HECM rights;
  • • Tax liens and tax sales;
  • • Land installment contracts;
  • • Manufactured homes;
  • • Condominiums.

Of special note, as described earlier in this article, NCLC’s Home Foreclosures includes a new § 5.13a on foreclosure defense related to the COVID-19 pandemic, including § 5.13a.5, Strategies to Challenge a Foreclosure As a Violation of Pandemic-Related Protections.

Author Name: 
Steve Sharpe
About Author: 

Steve Sharpe is a Staff Attorney at the National Consumer Law Center  focusing on foreclosures and mortgage lending. He represented homeowners at the Legal Aid Society of Southwest Ohio, LLC. and started his career in 2005 at Indiana Legal Services with a Skadden fellowship focused on representing borrowers with predatory loans.  Steve is a contributing author of National Consumer Law Center’s Mortgage Servicing and Loan ModificationsHome Foreclosures, and Truth in Lending legal treatises.  He is a cohort member of the Shriver Center’s Racial Justice Institute and a Consumer Fellow with the American Bar Associates Consumer Financial Services Committee. He received his B.A. from the University of Michigan and his J.D. from the Indiana University School of Law in Bloomington.

Date Created: 
Tuesday, December 7, 2021
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