It’s essential to know how recent laws and stimulus impact your brokerage and homeowners.
Congress, the GSEs, and federal agencies have been changing some of the consumer finance laws, regulations, and practices in response to the coronavirus (COVID-19) pandemic. Below are excerpts from a summary of changes, developed by the law firm of K&L Gates LLP. To view its more complete list of federal (and state) developments here.
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act)
- Forbearance for federally-backed mortgage loans: Borrowers of certain federally-backed mortgage loans may request up to a 180-day payment forbearance without additional fees, penalties, or interest beyond the usual amounts scheduled or calculated for regular payments. Borrowers may request up to an additional 180 days of forbearance (up to 360 days of total forbearance).
- Foreclosure moratorium: Federally-backed mortgage loan servicers shall not initiate foreclosures (judicial and non-judicial) or conduct foreclosure sales or foreclosure-related evictions until after May 17, 2020. The Act provides an exception for vacant and abandoned properties.
- Eviction moratorium: Starting March 27, 2020, and extending for 120 days, landlords are prohibited from initiating legal action to recover possession of a rental unit or to charge fees, penalties, or other charges to the tenant related to nonpayment of rent where the landlord’s mortgage on that property is insured, guaranteed, supplemented, protected, or assisted in any way by HUD, Fannie Mae, Freddie Mac, the rural housing voucher program, or the Violence Against Women Act of 1994.
- Credit reporting: Beginning January 31, 2020, and extending to the later of 120 days after March 27, 2020, or 120 days after the date the national emergency declaration is terminated, furnishers of information to credit reporting agencies who provide account forbearance or agree to modified payments for a consumer account impacted by COVID-19, should report such account as “current” or as the status reported before the accommodation during the period of the accommodation unless the consumer becomes current (so long as the consumer satisfies all requirements of the forbearance or modification agreement).
Fannie Mae and Freddie Mac
- For mortgages owned by Freddie Mac and Fannie Mae: Several relief options are now in place for home-owners who are directly or indirectly impacted by COVID-19, provided the homeowner’s ability to make timely mortgage payments has been negatively affected as a result of COVID-19.
- Foreclosure moratorium: Suspension of foreclosure sales for 60 days (through May 17, 2020)
- Credit reporting suspension: There will be no credit reporting for homeowners on an active forbearance plan, repayment plan, or trial period plan as a result of COVID-19-related hardship where the borrower is making the required payments as agreed, even though payments are past due.
- Forbearance plan eligibility: COVID-19-related hardships that have impacted the borrower’s ability to make monthly mortgage payments are considered eligible for forbearance hardships under existing agency guidance, and hardship may include unemployment, reduction in regular work hours, or illness (of the borrower or dependent family member).
No documentation is required to verify the hardship; and
Forbearance plans for up to 12 months, suspension of late charges and penalties, available regardless of property type (primary home, second home, investment property). - Loan modifications: Mortgage loan modifications must be considered near the conclusion of the forbearance plan term. Servicers are to evaluate COVID-19 borrowers for modifications under existing Extend Modification and Cap and Extend Modification requirements.
U.S. Department of Housing and Urban Development (HUD)
For all FHA loans:
- A 60-day foreclosure moratorium – applies to initiation and completion of foreclosures;
- A 60-day eviction suspension; and
- Deadlines of the first legal action and reasonable diligence timelines are extended by 60 days.
Consumer Financial Protection Bureau (CFPB) Examinations and Supervisory Activities
The CFPB will work with financial institutions to schedule examinations and supervisory activities in a manner “to minimize disruption and burden.”
In scheduling examinations and supervisory activity, the CFPB will:
- Cooperate with institutions to determine when supervisory events can be appropriately scheduled;
- Consider staffing and related resource challenges confronting the institutions and their counsel;
- Encourage prudent efforts undertaken in good faith, which are designed to meet the current needs of an institution’s borrowers and other customers;
- Consider the circumstances that entities face as a result of the COVID-19 pandemic; and
- Be sensitive to good-faith efforts designed by institutions to assist consumers.
To provide mortgage lenders with “flexibility” under the Home Mortgage Disclosure Act (HMDA), the CFPB has stated that:
- Until further notice, it will not “cite an examination” or “initiate an enforcement action” based on a failure by any financial institution to submit the Quarterly reporting required by the Home Mortgage Disclosure Act (HMDA).
- Institutions should continue collecting and recording HMDA data for the future, likely annual data submissions.
Major Consumer Protections Announced in Response to COVID-19 | NCLC Digital Library
This article, which will be updated as developments warrant, lists actions Congress, governors, federal and state agencies, and businesses are taking to protect consumers in light of the COVID-19 epidemic. These actions include suspensions on foreclosures, evictions, and terminations of telecommunications and utility service, elimination of interest and forbearance on student loan payments, limits on debt collection, and more.
Sue Johnson is the former executive director of RESPRO, the Real Estate Services Providers Council Inc. She retired in 2015 and is now a strategic alliance consultant.
