Homeowners and renters continue to be impacted by the coronavirus pandemic, as the economy has not yet fully recovered. On Thursday, August 27, the Federal Housing Finance Agency (FHFA) and Department of Housing and Urban Development (HUD) announced that Fannie Mae and Freddie Mac have extended the moratoriums on single-family foreclosures until December 31. The moratoriums cover some evictions as well. Previously, these moratoriums were set to expire on August 31.
The third extension of the moratorium was issued independent of the CARES Act passed by Congress in March. This legislation provided a 60-day moratorium on foreclosures and evictions on properties financed by federally backed mortgages. The FHFA requires direct mortgage servicers to halt all new foreclosure actions and suspend those in process. This is intended to help homeowners who have faced financial hardship due to the COVID-19 pandemic.
How Will Homeowners Be Affected?
According to FHFA director Mark Calabria, the move protects close to 28 million homeowners. Designed to keep borrowers in their homes during this difficult time, the moratorium extension provides benefits such as:
- Relief for about 28 million renters left out of federally mandated relief options.
- Homeowners struggling to pay their mortgage or facing possible foreclosure may have options to obtain assistance during the national emergency.
- Homeowners with a Federal Housing Administration (FHA) insured mortgage can request an extension of forbearance for up to a year.
- Waiving of penalties and late fees for delayed mortgage payments.
- Lump sum payments will not be required when the forbearance period ends.
- A qualified principal residents indebtedness exclusion, for up to $2 million (for married couples), of forgiven debt. This tax break is temporary unless Congress renews it.
However, the moratorium doesn’t apply to homeowners with private mortgages; separate moratoriums may apply to borrowers working with private lenders.
Does It Do Enough?
Housing advocates insist Americans need more relief than the extension provides. For example, the National Housing Conference has called on lawmakers to extend relief to up to 40 million renters at risk of being evicted. A letter to Congress submitted by 31 housing organizations requested protections for property owners and renters in the next stimulus package. According to the letter, COVID-19-impacted renters owe an estimated $25 billion in back rent and up to $70 billion by year’s end, potentially putting tens of millions at risk of eviction and financial ruin.
In July, foreclosure filings were down 83% from a year ago, according to ATTOM Data Solutions, but with economic fears and more people losing their jobs, some experts predict the numbers to rise in 2021. The current stalemate in Washington over the next relief package doesn’t help. House Democrats passed the $3 trillion HEROES Act in May. It would provide $175 billion in rent and mortgage assistance, while Senate Republicans have introduced their own stimulus proposal, which includes several smaller bills.
Nonetheless, the moratoriums on evictions and foreclosures are much needed. The results of a Mortgage Bankers Association survey in August led the organization to estimate 3.6 million homeowners are receiving forbearance and identify a spike in delinquencies for mortgage loans on one- to four-unit residential properties.
Contact OakTree Law for Mortgage Help
If you’re facing financial difficulties, foreclosure, or bankruptcy, the Los Angeles and Orange County bankruptcy attorneys at OakTree Law can help. Our law firm is open during the coronavirus pandemic to assist clients, conducting consultations by phone and filing cases with the courts. To request a free evaluation, contact us online or call 562-219-2979 today!