Skip to main content

Search

Mortgage Servicing and Loan Modifications: 12.3.4.3.3 Eligibility for Fannie Mae’s COVID-19 Deferral

Fannie Mae’s initial option for addressing forborne payments is its COVID-19 deferral program.320 To access this option, borrowers must have their COVID-19 hardship identified before November 1, 2023, and the final evaluation for the deferral must be completed before November 1, 2024.321 Borrowers with hardships identified on or after November 1, 2023, may have access to the standard deferral described in Chapter 7.

Mortgage Servicing and Loan Modifications: 12.3.4.3.4 How borrowers obtain a Fannie Mae COVID-19 Deferral

Fannie Mae does not require borrowers with COVID-19 hardships identified prior to November 1, 2023, to submit documentation of hardship or a borrower response package (BRP) or other financial documentation to access this option. Fannie Mae guidelines state that “quality right party contact” (QRPC) is required in order to determine basic information about the borrower’s finances, including whether the borrower can afford the pre-forbearance monthly payment.

Mortgage Servicing and Loan Modifications: 12.3.5.1 Freddie Mac Foreclosure Moratorium

On March 18, 2020, Freddie Mac announced a sixty-day moratorium on foreclosures due to COVID-19 through Freddie Mac Bulletin 2020-4. The initial moratorium only required a pause on foreclosure sales. As discussed above, the CARES Act broadened the scope of the moratorium to include initiating foreclosures and moving for judgment in active foreclosure cases.

Mortgage Servicing and Loan Modifications: 12.3.5.2.1 Generally

Even after the end of the COVID-19 national emergency, borrowers with Freddie Mac loans are entitled to forbearance for COVID-19 hardships. The availability of forbearance from Freddie Mac is not time limited because COVID-19 hardships fit within Freddie Mac’s standard forbearance language. It is important to note that Freddie Mac’s forbearance provisions are not mandatory.

Mortgage Servicing and Loan Modifications: 12.3.5.2.2 Freddie Mac post-forbearance options

For borrowers with COVID-19 hardships that are exiting forbearance, Freddie Mac has developed options to address the unpaid amounts beyond making a lump sum payment. While Freddie Mac includes payment of a lump sum as one possible means of addressing forborne payments, its regulator has said that a servicer cannot require a lump sum payment at the end of forbearance.349 Freddie Mac provides a menu of alternatives that hinge on whether the borrower can resume making their pre-forbearance mortgage payment.

Mortgage Servicing and Loan Modifications: 12.3.5.2.3 Eligibility for Freddie Mac COVID-19 deferral

Freddie Mac’s initial option for addressing forborne payments is its COVID-19 deferral program.350 To access this option, borrowers must have their COVID-19 hardship identified before November 1, 2023, and the final evaluation for the deferral must be completed before November 1, 2024.351 Borrowers with hardships identified on or after November 1, 2023, may have access to the standard deferral described in Chapter 7.

Mortgage Servicing and Loan Modifications: 12.3.6.2 FHA Foreclosure Moratorium

The FHA issued an initial moratorium on foreclosures, which covered the initiation of foreclosures, on March 18, 2020, through HUD Mortgagee Letter 2020-04.367 Upon expiration of the CARES Act, HUD extended the moratorium to June 30, 2020, to August 31, 2020, to December 31, 2020, to February 28, 2021, to March 31, 2021, to June 30, 2021, and then to July 31, 2021.368 The extension of the deadline to July 31, 2021, was in response to the Biden Administration’s policy announcement to help borrowe

Mortgage Servicing and Loan Modifications: 12.3.6.4.1 Generally

HUD has provided specific options for borrowers facing long-term, COVID-19-related hardships and has amended them several times during the pandemic. On April 1, 2020, HUD issued Mortgagee Letter 2020-06 that implemented the COVID-19 Standalone Partial Claim for borrowers with pandemic related hardships who fall behind on their loans. In response to consumer advocates, HUD expanded the options through Mortgagee Letter 2020-22 on July 8, 2020 and provided further updates through Mortgagee Letter 2021-05 on February 16, 2021.

Mortgage Servicing and Loan Modifications: 12.3.6.4.3 COVID-19 Standalone Partial Claim

The COVID-19 Standalone Partial Claim allows owner-occupant borrowers who can afford their pre-forbearance monthly payments to become current with a zero percent interest loan from HUD that is recorded as a mortgage and is generally payable at the end of the loan term. The partial claim brings their loan current by covering full principal, interest, taxes, and insurance (PITI) payments. It is the same as a standard FHA partial claim except that borrowers do not need to submit financial information to access it.

Mortgage Servicing and Loan Modifications: 12.3.6.4.4 COVID-19 Recovery Modification

If the owner-occupant borrower indicates that a payment pursuant to the COVID-19 Standalone Partial Claim is not affordable, the servicer should then evaluate the borrower for the COVID-19 Recovery Modification (Recovery Modification).397 The Recovery Modification combines a loan modification and a partial claim in order to target a 25% reduction in the borrower’s monthly principal and interest payment from its pre-hardship level.398 The targeted payment reduction makes the Recovery Modification

Collection Actions: 1.5.2 Debt Buyers Identified

Debt buyers come in all shapes and sizes. The CFPB estimates that there are about 330 debt buyers in the United States, and that the majority of these entities are small.41 However, most collection lawsuits are brought by large corporate debt buyers that do business on an enormous scale, often collecting debts under a variety of names. Today’s largest debt buyer is probably Encore Capital Group (Encore), which operates under the names Midland Funding, Midland Credit Management, and Asset Acceptance Capital Corporation.

Collection Actions: 1.5.3 The Nature of Debt Sales to Debt Buyers

A debt buyer typically purchases thousands of accounts per sale from a creditor or another debt buyer. This group of accounts is called a “portfolio.” Debt may be grouped into portfolios based on the type of accounts, length of time since default, or the number of prior collection placements.44 Sellers typically market portfolios of debt for sale and prospective buyers bid on those portfolios.45

Collection Actions: 1.1.2 Topics Covered in This Treatise

This treatise assists attorneys in the representation of consumers sued on credit card, medical, and other consumer debts. In recent years, there has been an explosion in not only the number of consumer debts being enforced in courts, but in the number of such actions in which the consumer does not owe the debt, the consumer has substantial defenses, or the creditor has no reliable evidence as to whether the consumer owes the debt.

Collection Actions: 1.5.1 Dramatic Growth in Debt Buying

Attorneys representing consumers in collection cases must consider the implications of the dramatic growth of the debt buying industry. A large portion of collection lawsuits are brought by a debt buyer, not the original creditor.

Collection Actions: 1.2.6 Additional Digital Pleadings, Practice Tools, and Primary Source Materials

The digital version includes pleadings and discovery, practice tools, and primary source materials. They are listed under the “Companion Materials” tab of the “Contents” pane on the left side of the screen and are fully searchable. Search filters allow users to search across “Pleadings and Discovery,” “Primary Sources,” and/or “Practice Tools.” The user can then use a number of additional filters to further narrow search results.

Collection Actions: 1.3 Additional NCLC Resources

This treatise comprehensively covers a consumer’s rights when the consumer is sued in a collection action or where the consumer’s income or property is subject to seizure for an unsecured debt. However, this treatise cannot cover all areas of consumer debt. This treatise should be read in conjunction with other NCLC treatises, which cover certain special types of collections or consumer rights regarding debt.