Borrowers with federally backed mortgage loans facing financial difficulty can breathe a little easier today. All of the federal agencies regulating such loans have announced that they will extend the moratoriums on foreclosure and evictions for single-family properties until December 31, 2020. Federal Housing Finance Agency (FHFA) issued a press release on August 27, 2020 regarding Fannie Mae and Freddie Mac that was followed by a Lender Letter and an Announcement from the agencies. The similar pronouncements from the Department of Housing and Urban Development (HUD) and the Department of Veterans Affairs (VA) were announced via HUD Mortgagee Letter 2020-27, VA Circular 26-20-30 (foreclosures) and VA Circular 26-20-29 (evictions).
The current moratoriums were all set to expire on August 31, 2020. Each agency confirmed that the extended moratoriums are focused on keeping borrowers in their homes during the COVID-19 pandemic.
Consistent with prior guidance, vacant and abandoned properties are excluded from the moratoriums. HUD’s Lender Letter also confirmed that “Deadlines for the first legal action and reasonable diligence timelines are extended by 90 days from the date of expiration of this moratorium for FHA insured Single Family mortgages, except for FHA-insured mortgages secured by vacant or abandoned properties.”
Borrowers with federally backed mortgage loans continue to have the right to request forbearance of up to a year’s payments under the Coronavirus Relief and Economic Security Act (CARES) Act from their mortgage servicer. Although the federal agencies believe continued assistance is needed for their borrowers, we note that the number of borrowers taking advantage of their forbearance rights continues to decline. On August 17, 2020, The Mortgage Bankers Association’s (MBA) advised that their latest Forbearance and Call Volume Survey showed that “the total number of loans now in forbearance decreased by 23 basis points from 7.44% of servicers’ portfolio volume in the prior week to 7.21% as of August 9, 2020. According to MBA’s estimate, 3.6 million homeowners are in forbearance plans.” However, the MBA also recently reported a spike in the delinquency rate for mortgage loans on 1-4 residential properties and noted that the 2020 second quarter results “also mark the highest overall delinquency rate in nine years.” That data indicates growing problems for American homeowners and that the federal moratoriums on foreclosure and evictions are needed.