(STL.News) – In the wake of the COVID-19 pandemic, Michigan Attorney General Dana Nessel and a bipartisan coalition of attorneys general demanded action to help homeowners in letters sent late last week to the Federal Housing Finance Administration (FHFA) and the Department of Housing and Urban Development (HUD).
Federal efforts have included suspending evictions and foreclosures, and additional forbearance and foreclosure relief for homeowners whose loans are backed by Fannie Mae and Freddie Mac or other federal entities. But the coalition is calling for more protections for those homeowners.
As part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), FHFA and HUD have already adopted streamlined processes for borrowers who have been affected by COVID-19 to enter into forbearance plans, which allow borrowers to pause mortgage payments for a limited period of time. But once the forbearance period ends, borrowers are currently being asked to either repay the missed payments in a lump sum or enter into a more permanent loss mitigation solution.
Because an unprecedented number of borrowers will need help at essentially the same time, the letters recommend moving the missed payments to the back of the loan term to allow immediate relief for homeowners and limit the strain on the mortgage-servicing industry.
“This pandemic calls for a new way of thinking across a broad spectrum of industries and arenas, and the housing market is no exception,” Nessel said. “These federal agencies have helped homeowners by making it easier for them to delay payments on their mortgages, which certainly brings with it a sense of security and peace of mind during such uncertain times. But more can be done by not charging these homeowners a massive bill all at once, which may not be a practical or affordable option for many people. That’s why my colleagues and I are urging the FHFA and HUD to follow through on these commonsense changes to make sure people can keep their homes.”
The letters make three recommendations FHFA and HUD should do:
- Issue guidance revising their forbearance programs so that missed payments are automatically placed at the end of the loan’s term;
- Expand eligibility for disaster relief loss mitigation programs; and
- Clarify that the moratorium on foreclosures and evictions applies to all aspects of the foreclosure or eviction process. That includes issuing pre-foreclosure and acceleration notices, posting or publishing any notices, filing or proceeding with motions beyond continuances, or taking any other foreclosure or eviction action during the moratorium.
The protection of the CARES Act applies only to federally backed mortgages, which make up about 62 percent of the mortgage market. Borrowers who are not covered should contact their mortgage servicer (the company they send their monthly payment to) to determine whether it is offering any relief during the pandemic.
In addition to Nessel, attorneys general from the following states and territories signed the letters: California, Colorado, Connecticut, District of Columbia, Delaware, Florida, Hawaii, Idaho, Illinois, Iowa, Maine, Maryland, Massachusetts, Minnesota, Montana, Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, Puerto Rico, Rhode Island, South Dakota, Tennessee, Vermont, Virginia, Washington, West Virginia, and Wisconsin.
Click here to view a copy of the letter sent to HUD.
Click here to view a copy o the letter sent to FHFA.
Are you eligible for relief?
If you have a federally backed mortgage, you have the right to request a forbearance for up to 180 days if you have a financial hardship due to the COVID-19 pandemic. You also have the right to request one extension for up to another 180 days.
The Consumer Financial Protection Bureau offers a guide to COVID-19 mortgage relief options on its website. To determine whether you are eligible for a forbearance plan or other assistance:
- First find out who services your mortgage and whether you have a federally backed mortgage. See tips from CFPB or go to FannieMae or Freddie Mac’s look up tool.
- If you do not have an eligible mortgage, your servicer or financial institution may be offering relief to borrowers. Call your servicer and let them know your situation immediately. Ask them what “forbearance” or “hardship” options may be available.