In response to the COVID-19 pandemic, both federal and state foreclosure moratoriums have aided homeowners who are at risk of foreclosure. It is important to remain informed about COVID-era protections for homeowners as they evolve.
The COVID-19 pandemic caused life to change rapidly for many. Suddenly people around the country were at risk of losing their homes through foreclosure. Many people lost their jobs and the national economy took a downward turn. The federal government, state governments, and even some private businesses stepped in to prevent the situation from getting worse.
One federal response to the coronavirus pandemic was a temporary moratorium on foreclosures for certain types of home loans. More protections for homeowners were developed by state and federal governments as the seriousness of the pandemic became clearer. This article will help you understand what a foreclosure moratorium is and what COVID-19 protections might be available to help you.
Forbearance and Foreclosure Protections for Homeowners
President Biden declared a national emergency in March 2020 due to the COVID-19 pandemic. This was extended in February of 2021. In response to the emergency, Congress passed the CARES Act. The CARES Act contained a law that prohibited banks from foreclosing on homes with federally backed mortgages, including:
Fannie Mae or Freddie Mac loans,
Veterans Administration (VA) loans,
Federal Housing Authority (FHA) loans, and
United States Department of Agriculture (USDA) loans.
This temporary prohibition on foreclosures is referred to as a foreclosure moratorium. These foreclosure protections were meant to help homeowners with federally backed mortgages who were struggling financially because of the pandemic.
Congress also passed the American Rescue Plan Act, which gave money to states, territories, and tribes to implement homeowner assistance programs. The U.S. Department of Housing and Urban Development (HUD) website has COVID-19 information for each state. Be sure to check if there are any protections that might help you. There may also be other state or local protections for homeowners.
To help you understand the protections, let’s first clarify some terms.
Foreclosure is a legal action lenders take to repossess real estate when borrowers don’t make their mortgage payments.
A foreclosure moratorium stops foreclosure legal actions.
An eviction moratorium stops evictions.
An eviction moratorium on foreclosures means lenders are banned from evicting people that are going through a foreclosure.
A forbearance postpones mortgage payments.
How To Find the Latest Information
As the pandemic continues in the U.S., the federal government has extended many COVID-19 protections, but several have also expired. It’s important to check for the latest information. You can check the Consumer Financial Protection Bureau (CFPB) website and your mortgage servicer’s website for more information. The HUD website also has useful information. You can also check the Federal Register and the Federal Housing Finance Agency (FHFA).
How To Know What Protections You Qualify for
Contacting your mortgage servicer is a good place to start to see what foreclosure protections you may have. You can find your servicer’s phone number on your most recent statement. Ask them if you are protected by a foreclosure moratorium or if you qualify for a forbearance plan or other foreclosure protections. Keep in mind, your hardship must be related to COVID-19 to qualify. For instance, if your childcare needs or hours at work were affected because of COVID-19, you could qualify. Many programs apply only to single-family homes and residential foreclosures.
Forbearance Agreements and Repayment Options
During the moratorium, many homeowners entered into a forbearance agreement to postpone their loan payments. When you’re in forbearance, your mortgage payments are postponed, but the lender doesn’t forgive them. You still owe the money on your home loan, and you’ll have to figure out how to make up the missed payments. Luckily, there are options, including:
Mortgage Reinstatement – You can pay the lump sum amount for the past-due payments that were a part of your forbearance agreement and your loan will be back to normal.
Mortgage Loan Modification – You can make a new payment agreement and pay a little more each month to repay the amount that was in forbearance.
Mortgage Loan Deferment – You can have the amount due from the forbearance agreement tacked on to the end of your loan. You’ll be required to pay the amount if you sell or refinance the home.
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Help Available After the Foreclosure Moratoriums Expire
Federal foreclosure moratoriums for pandemic-related foreclosures have ended but transition programs are in place. States received a lot of money to develop policies and programs to protect renters and homeowners from being bombarded with debt once the moratoriums were lifted.
Some states have extended moratoriums. You can check your state’s website for executive orders related to COVID-19. For instance, New Jersey has extended its eviction moratorium to November 15, 2021. Several states have different repayment options and extensions to help residents who are having difficulty making their mortgage payments or who are facing foreclosure or eviction.
Even when the U.S. isn’t in a state of emergency, the CFPB provides protection measures for homeowners facing foreclosure. For instance, your mortgage servicer must have you fill out a loss mitigation application before they begin a foreclosure proceeding. They must also try to make live contact with you no later than 36 days after the due date of your last delinquent payment. If a property is abandoned by a borrower, the lender must confirm that it was abandoned in compliance with state and local laws.
An eviction moratorium is a temporary ban on evictions. Some eviction moratoriums apply to all evictions, including renters and homeowners who’ve gone through foreclosure. Others apply just to renter evictions or just foreclosure evictions. Some eviction moratoriums protect entire communities, like those with high COVID-19 transmission rates. Others seek to protect certain groups like low-income individuals and families. It’s easy to confuse the federal eviction and foreclosure moratoriums, but each provided different protections and expired on different dates.
That said, both federal moratoriums have ended, with the eviction moratorium ending on September 30, 2021. Fortunately, many states have extended the moratorium. Be sure to check the news and your state’s government website for updated information on evictions if you’re having trouble making your mortgage payments or paying your rent.
Many homeowners have struggled to make their mortgage payments because of COVID-19. The CARES Act, American Rescue Act, and regulations made by the Consumer Financial Protection Bureau include programs to protect homeowners from foreclosure and eviction. Two important examples were the foreclosure and eviction moratoriums. While both of the federal moratoriums have since expired. Some states have extended these programs. Many homeowners also still qualify for a forbearance.
Be sure to check government websites and talk to your mortgage servicer for the latest news. You also have the option to talk to social services, legal aid, or an attorney if you’re facing eviction or foreclosure. Keep up with the COVID-19 homeowner protection news and find a plan that works for you.