The Federal Government has approved protections for homeowners struggling economically as a result of COVID-19 related illness or loss of wages. Below you will find resources to several foreclosure moratoriums that could save your home.
U.S. Department of Housing and Urban Development (HUD) authorized the Federal Housing Administration (FHA) to implement an immediate foreclosure and eviction moratorium for single family homeowners with FHA-insured mortgages through December 31, 2020.
- The guidance issued applies to homeowners with FHA-insured Title II Single Family forward and Home Equity Conversion (reverse) mortgages.
The Federal Housing Finance Agency (FHFA), which oversees mortgage giants Fannie Mae and Freddie Mac, also extended its foreclosure moratorium through at least the end of August, 2020. This moratorium applies to any mortgage that is owned by a government sponsored enterprise (GSE), more commonly known as Fannie Mae or Freddie Mac.
The Department of Veterans’ Affairs, which guarantees VA loans, has issued its own extension of the foreclosure moratorium. It also extended the prohibition against foreclosing on VA loans through August 31, 2020
Mortgages that are guaranteed by the United States Department of Agriculture (USDA loans) also received an extension of the foreclosure moratorium through August 31, 2020.
CARES ACT relief for homeowners
- The Coronavirus Aid, Relief, and Economic Security Act (CARES Act), passed March 27th, created further temporary foreclosure protections for homeowners with federally-backed mortgages.
- The CARES Act extended the foreclosure moratorium to all federally-backed mortgages, not just FHA insured mortgages.
What is a federally backed mortgage under the CARES Act?
- A federally-backed mortgage is a mortgage that is issued, purchased, or insured by one of the following government agencies: Fannie Mae, Freddie Mac, the United States Department of Veteran’s Affairs (VA), the Federal Housing Administration (FHA), and the United States Department of Agriculture (USDA).
How do I find-out if my mortgage is federally-backed?
- Lone Star Legal Aid has created a new tool, LSLA CARES, to help you search the many public databases available to find out if your property is subject to the CARES Act. See if your property is covered here.
What are my rights to avoid foreclosure if my loan is federally-backed?
- Your lender cannot foreclose on you until at least June 30, 2020 if you have a loan insured by the FHA, backed by the FHFA (via Fannie Mae or Freddie Mac), or backed by the VA or USDA. In Texas, foreclosure sales are only held on the first Tuesday of every month.
- If you need it, your lender must offer you a forbearance agreement to temporarily suspend or reduce your mortgage payments. All you have to do is tell your mortgage servicer (middle man that sends you your monthly mortgage statements) that you’re experiencing a financial hardship due to the economic effects of COVID-19. This can be done in writing or via phone. Some mortgage servicers may also have an online form you can complete to tell your servicer that you’re experiencing a financial hardship due to the economic effects of COVID-19.
- The forbearance agreement can last up to 180 days. If you ask, the forbearance agreement can be extended up to another 180 days.
- You can ask for a forbearance agreement anytime between March 27th and the earlier of:
- The end of the presidential disaster declaration due to COVID-19; or
- December 31, 2020.
What is a forbearance agreement?
- A forbearance agreement is a short-term agreement with your lender that modifies your mortgage payments and limits your lender’s right to foreclose. Under a forbearance agreement, your mortgage payments may be temporarily lowered or temporarily postponed.
What are some important things I need to know about forbearance agreements?
- A forbearance agreement does not cancel your requirement to pay your mortgage. After the forbearance agreement ends, you will have to pay back all of the mortgage payments that you put-off.
- Before you agree to a forbearance, make sure you understand up-front how you will be required to pay-back your mortgage. For example, you may need to make sure the lender will let you pay back the mortgage payments you did not make during your forbearance in installments instead of in one lump sum. There are other options available to ensure you able to continue to afford your home once the forbearance period ends. Your lender can foreclose on you in the future if you do not pay back your mortgage payments according to the terms of the forbearance agreement!
- Even with a forbearance agreement, some people still have mortgage-related expenses to pay – such as property taxes and homeowners insurance, and possibly property owners’ association assessments/dues – if they do not have an escrow account. Ask your lender to tell you if you have any expenses to pay while you are under a forbearance agreement.
- What can I do if my mortgage is not federally backed?
- Only about two-thirds of mortgages in the United States are federally backed.
- If your mortgage is not federally-backed, your lender might (but does not have to) offer you some kind of loss mitigation (forbearance agreements are one type of loss mitigation) to avoid foreclosure. Call your loan servicer or check your loan servicer’s website.
- Your loan might be owned by a company other than your loan servicer. Ask your loan servicer to tell you who owns your loan, or send your loan servicer a “Request for Information” letter as discussed above, requesting information from your loan servicer for all loss mitigation options available for your loan and instructions on to apply for and/or request each loss mitigation option.
- Final Tips:
- If you can afford to pay your mortgage and still cover your necessary living expenses, go ahead and pay it.
- If you can’t afford to pay, find-out if you have a federally-backed mortgage. If so, contact your mortgage servicer right away and ask to set up a forbearance agreement. Make sure you understand the terms of the forbearance agreement before you sign-off.
- If you don’t have a federally-backed mortgage but can’t afford your payments, you should still contact your loan servicer right away. Your loan servicer or the entity that owns your loan might be voluntarily offering other loss mitigation options to avoid foreclosure due to COVID-19.
Lone Star Legal Aid is a 501(c)(3) nonprofit law firm focused on advocacy on behalf of low-income and underserved populations. Lone Star Legal Aid serves millions of people at 125% of federal poverty guidelines that reside in 72 counties in the eastern and Gulf Coast regions of Texas, and 4 counties of southwest Arkansas. Lone Star Legal Aid focuses its resources on maintaining, enhancing, and protecting income and economic stability; preserving housing; improving outcomes for children; establishing and sustaining family safety and stability, health and well‐being; and assisting populations with special vulnerabilities, like those who have disabilities, or who are elderly, homeless, or have limited English language skills. To learn more about Lone Star Legal Aid, visit our website at www.lonestarlegal.org.
Media contact: Clarissa Ayala, firstname.lastname@example.org.