How COVID-19 Affects Foreclosures

There are a lot of nervous homeowners out there. While it takes 180 days before a lender can initiate a foreclosure, both the business and private mortgage sector are right to be wondering what to expect with legal and real estate challenges posed by Coronavirus impacts on the economy and timely payments. Across the country and state by state, we are witnessing an unease with the status quo. This is an update that should bring some guidance to those wondering what the status of foreclosures in both the commercial and private mortgage worlds.

FORECLOSURE AUCTIONS

Looking for a great deal on a home? Now might be the perfect time to hop in your hazmat suit and drive on over to the county courthouse to pick up a house for less money than usual.

As of this writing, foreclosure auctions are still active (in Texas), with over one hundred available homes still scheduled. Of course, almost two thousand have been canceled, but if you are looking for that perfect 2 bed, 2 bath home in Corpus Christi, that opening bid set at $60,000 might just go unanswered.

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That is, of course, if more auctions are not canceled before the next auction date set for April 7th. (Update: They were) Between now and then, there could very well be changes as we all experience COVID impacts day-by-day in America. While single-family mortgages of individual loan servicers have not yet offered relief plans, the Federal government has jumped into action.

COVID FORECLOSURES IN THE COMMERCIAL SECTOR

On March 24th, 2020, Freddie Mac and Fannie Mae released plans to mitigate the economic hardship from the coronavirus pandemic, allowing some multifamily building owners to defer their loan payments for roughly three months. Following on the heels of that announcement, the government went big.

THE “CARES” ACT

After the Freddie Mac and Freddie Mae announcement, another big relief plan was released. On March 27, 2020, the President signed into law the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”). Within this act are provisions related to foreclosures. A borrower with a “federally backed mortgage loan” experiencing financial hardships due, directly or indirectly, to the COVID–19 emergency may request forbearance for up to 180 days, which may be extended for an additional period of up to 180 days, regardless of delinquency status.

In addition, a servicer of a federally backed mortgage loan may not initiate any judicial or non-judicial foreclosure process, move for a foreclosure judgment or order of sale, or execute a foreclosure-related eviction or foreclosure sale for not less than the 60-day period beginning on March 18, 2020.

COVID FORECLOSURES IN THE HOUSING SECTOR

For multifamily properties subject to a federally backed multifamily mortgage loan, borrowers experiencing financial hardships due, directly or indirectly, to the COVID–19 emergency may also request a 30-day forbearance, provided they were current on their payments as of February 1, 2020. Owners of multifamily properties who are approved to participate in the Freddie Mac and Fannie Mae relief plans must not evict tenants “based solely on non-payment of rent during the forbearance period,” according to Freddie Mac’s announcement. The CARES act will also be sending taxpayers a $1,200 check to assist with costs that could lead to foreclosure by private-sector lenders.

“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.”

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