12.3.2 COVID-19 Assistance
There has been local, state, and federal assistance for borrowers with COVID-19 hardships. The federal provisions generally apply only to “federally-backed” mortgages, which includes loans backed by Fannie Mae and Freddie Mac and loans insured by federal agencies. There are very limited published guidelines to assist borrowers without federally backed loans. Knowing the relevant investor of the loan is critical to knowing what assistance a borrower is entitled to receive.
The general categories of assistance are as follows:
Federal moratorium on foreclosures. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was enacted and provided broad relief for people facing coronavirus hardships.12 Its section on mortgages included a sixty-day ban on foreclosure activity, which covered the initiation of new foreclosures.13 This provision expired on May 17, 2020 without being extended.
Agency moratoria. Even before passage of the CARES Act, the federal agencies that own, insure, and guarantee loans issued moratoria on foreclosures.14 When the CARES Act moratorium expired, there were still significant levels of unemployment and numbers of borrowers in forbearance. In response to the continued economic harm from the pandemic, the Biden Administration directed FHA, VA, and USDA to extend their moratoria through June 30, 2021, and the GSEs, which are regulated by the independent Federal Housing Finance Administration (FHFA), have aligned their moratoria and extended them through June 30, 2021, as well.15 Advocates facing disputes regarding the moratoria should review the individual agency announcements, however, because they include different details and are covered below. Advocates should also continue to monitor the actions of these federal agencies as the scheduled expiration date arrives. In addition, as discussed below, a number of states have implemented COVID-19 based moratoria on foreclosure activity.16
Forbearance. Given the sudden and unexpected increase in unemployment due to COVID-19, many homeowners needed forbearance on payments, which is a pause on their obligation to make payments. Forbearance plans do not waive or otherwise forgive payments; instead, forbearance plans put the borrowers’ obligation to pay on hold to allow for recovery of ability to repay. Prior to the CARES Act, the terms of forbearance plans were dictated by the relevant investor. Under the CARES Act, borrowers with federally-backed loans who faced COVID-19 hardships are entitled to up to 360 days of forbearance when they make an attestation of a COVID-19 hardship. The relevant investor, however, still dictates certain aspects of the forbearance, how to access it, and, for some borrowers, the extent of the forbearance available. In addition to the CARES Act, some states have provided separate forbearance protections for borrowers who do not have federally-backed loans; however, most states have not provided such relief.17
Post-forbearance options. Although forbearance plans help borrowers avoid foreclosure and limit the impact of non-payment on credit scores, they do not provide a resolution of the unpaid debt. Moreover, the GSEs and the agencies that guarantee loans have recognized that borrowers facing default often do not have large lump sums needed to reinstate their loans when forbearance ends. Therefore, additional options are needed to bring borrowers current after forbearance. Fannie Mae, Freddie Mac, and FHA created streamlined options specifically tailored to COVID-19 hardship based on their existing loss mitigation loan modification and deferral programs. There are slight variations in the options available based on the unique aspects of each program. The GSEs and FHA have implemented programs that allow borrowers to make the amounts not paid during forbearance due at the end of the loan’s repayment term. This works essentially as a “balloon payment” due when the borrower completes the loan’s original payment schedule or otherwise pays off the loan. Other options related to modifying the future monthly payment terms vary significantly by federal agency guidelines. The guidelines also differ in how borrowers access the programs, including what documentation is required. This chapter will go in depth on the programs available. The specific options will depend on the entity that insures, guarantees, or owns the loan.
In many instances, borrowers facing COVID-19 hardships will not have to submit financial information to access permanent loss mitigation options. This is contrary to how loss mitigation was implemented through the Home Affordable Modification Program (HAMP) and many of the programs that followed it. To address these differences in the process, the CFPB issued an interim final rule (IFR) that reconciled its loss mitigation application rules with the process the GSEs set up for their COVID-19 deferral programs.18
12 116 Pub. L. No. 336, 134 Stat. 490 (Mar. 27, 2020) (hereinafter “CARES Act”).
13 15 U.S.C.A. § 9056.
15 The White House, Fact Sheet: Biden Administration Announces Extension of COVID-19 Forbearance and Foreclosure Protections for Homeowners (Feb. 16, 2021); Federal Housing Finance Agency, News Release, FHFA Extends COVID-19 Forbearance Period and Foreclosure and REO Eviction Moratoriums (Feb. 25, 2021).
16 See § 12.3.9, infra, discussing state-based coronavirus relief. See also National Consumer Law Center, Home Foreclosures § 5.14a (2019), updated at library.nclc.org, discussing potential defenses to foreclosure that raise non-compliance with federal and state COVID-19 moratoria and other relief measures.
17 See § 12.3.9, infra, discussing state law protections.
18 85 Fed. Reg. 39,055 (June 30, 2020), § 126.96.36.199.4, supra.