How COVID-19 Affects Foreclosures

COVID-19 rightfully has a lot of homeowners (and real estate investors)nervous about the risk of foreclosure. Though a lender has to wait 180 days to initiate a foreclosure, both the private and business mortgage sectors are wondering what will happen to the economy and timely mortgage payments in the aftermath of this worldwide pandemic.

Foreclosure Auctions

If you’re looking for a steal of a deal on a home, now is the perfect opportunity to mask up and head to the county courthouse. As of this writing, foreclosure auctions are still active in many states if you’re willing to brave a trip to the courthouse. Texas currently has half a dozen homes still listed, so now may be the perfect time to snatch up that 3 bedroom investment property in El Paso you’ve been daydreaming about for an incredible price of $30,000 and minimal bid competition.

Nearly 2,000 foreclosure auctions were cancelled in the past month in Texas, but those will need to be relisted again someday. Keep an eye on foreclosure auction listings in your target investment area and you may just get lucky.

Commercial Loan Relief

In late March, Freddie Mac and Fannie Mae announced a relief plan for owners and renters of multifamily apartment complexes. To reduce the financial burden from the COVID-19 outbreak, they offered 90 days of deferred payments on commercial mortgages financed through the mega-funders, which provided relief to both landlords and tenants. In the wake of that announcement, the federal government also went big.The 'Cares' Act

Three days after Fannie and Freddie’s announcement, the President signed the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) into law. Specific to foreclosures, the bill offered up to 180 days of forbearance to any borrower with a “federally backed mortgage loan” who was experiencing financial hardships due to the national emergency. A second forbearance period of an additional 180 days may be requested following the first, regardless of delinquency status.

The bill also included protections against foreclosures, preventing servicers of a federally backed mortgage from initiating of any judicial or non-judicial foreclosure, moving for a foreclosure judgement or order of sale, or executing a foreclosure-related eviction or foreclosure sale for not less than the 60-day period beginning on March 18, 2020.

Evictions & Covid Relief

Borrowers for multifamily properties were also granted a 30-day forbearance on their federally backed multifamily mortgage loans provided they were current on their payments as of February 1, 2020. These property owners who participate are barred from evicting tenants “based solely on non-payment of rent during the forbearance period.” This, combined with the $1,200 stimulus check provided by the federal government, is intended to keep tenants in their homes during this global crisis.

“Renters should not have to worry about being evicted from their home, and property owners should not have to worry about losing their building, due to the coronavirus,” says FHFA Director Mark Calabria. “The multifamily forbearance and eviction suspension offered by the Enterprises should bring peace of mind to millions of families during this uncertain and difficult time.”


Last Updated: 
April 23, 2020

Scott Royal Smith is an asset protection attorney and long-time real estate investor. He's on a mission to help fellow investors free their time, protect their assets, and create lasting wealth.

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