April 23, 2020
Bipartisan
coalition of attorneys general suggests actions to deal with
unprecedented disruption to the mortgage market
Carson City, NV – In
the wake of the COVID-19 pandemic, Attorney General Aaron D. Ford and a
coalition of 34 attorneys general recommended actions to help homeowners in
letters sent to the Federal Housing Finance Administration (FHFA) and the
Department of Housing and Urban Development (HUD).
The attorneys
general applauded federal efforts to suspend evictions and foreclosures, and expressed
appreciation for additional forbearance and foreclosure relief provided by
the Coronavirus Aid, Relief, and Economic Security (CARES)
Act. The coronavirus-relief legislation, which was signed by
President Trump on March 27, provides protections for homeowners
whose loans are backed by Fannie Mae and Freddie
Mac or other federal entities.
“COVID-19 will
present unprecedented challenges to homeowners and the mortgage servicing industry,
and protecting Nevadans’ most import asset—their homes—is of critical
importance,” said AG Ford. “These recommendations will
help millions of American homeowners avoid delinquency and limit the
potentially disastrous strain on the mortgage servicing industry, especially
here in Nevada. We’re asking all financial institutions and servicers to work
with borrowers who cannot meet their obligations because of the pandemic.”
As part
of the CARES Act, FHFA and HUD have
already adopted streamlined processes
for borrowers affected by COVID-19 to enter into forbearance
plans, which allow borrowers to pause mortgage payments for a
limited period of time. At this time, once the forbearance period ends,
borrowers are being asked to either repay the missed payments in a lump sum or
enter into a more permanent loss mitigation solution. Nevada may be one of
the most severely impacted states. Because an unprecedented number of
borrowers will need help and those borrowers will
all seek help at essentially the same time, the letters
recommend moving the missed payments to the back of the loan term. This would
allow immediate relief for homeowners and simultaneously limit the strain on
the mortgage servicing industry.
Under the
recommended procedures, borrowers would be excused from being asked
to immediately repay the missed payments in a lump sum at
the end of the forbearance plan. This issue is causing considerable
borrower confusion and concern.
The letters recommend
that:
- The FHFA and HUD should issue guidance
revising their forbearance programs so that forborne payments are placed at the
end of the loan’s term;
- The FHFA and HUD should expand
eligibility for disaster relief loss mitigation programs; and
- The FHFA and HUD should clarify that the
moratorium on foreclosures and evictions applies to all aspects of the
foreclosure or eviction process. This 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 approximately 62 percent of the mortgage
market. Borrowers who are not covered should contact
their mortgage servicer, the company they send their
monthly payment to, in order to determine whether it is offering any
relief during the pandemic.
In addition to Nevada, other states that
participated in this letter include: California, Colorado, Connecticut,
Delaware, the District of Columbia, Florida, Hawaii, Idaho, Illinois, Iowa,
Maine, Maryland, Massachusetts, Michigan, Minnesota, Montana, Nebraska, 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 andWisconsin.
The issued letters to the FHFA and HUD are
attached.
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