President Joe Biden recently announced an extension of the foreclosure moratorium and the forbearance period for mortgages backed by HUD, VA and USDA through June 30. Separately, the Federal Housing Finance Agency extended the foreclosure and eviction moratorium period until March 31, as well as forbearance period by three months for mortgages held by Fannie Mae and Freddie Mac.
Combined, these extensions and moratoriums on foreclosures and evictions cover approximately 70% of all single-family home mortgages.
FHFA’s foreclosure and eviction moratorium applies to single-family mortgages. Payment deferrals allow borrowers to repay the missed payments when the property is sold, the mortgage is refinanced or is at mortgage maturity.
Additionally, FHFA made available a possible forbearance extension for an additional three months for property owners on a COVID-19 forbearance plan as of Feb. 28. This means that property owners can remain in forbearance for up to 15 months.
For FHA-backed mortgages, regardless of default status, lenders must offer a COVID-19 forbearance to any borrower that is unable to make on-time mortgage payments due to the COVID-19 pandemic. Borrowers may be eligible for forbearance for a total of 18 months. So as long as a borrower is on a COVID-19 forbearance, the lender must waive all late charges, fees and penalties.
FHA’s moratorium on foreclosures and evictions prevents the initiation of foreclosures and stops any existing foreclosures from proceeding through at least June 30.
In addition to the foreclosure moratorium and forbearance period similar to other federally-backed mortgages, USDA has also temporarily suspended non-judicial foreclosures, debt offsets and wage garnishments for loans in its Farm Storage Facility Loan and Direct Farm Loan programs. The temporary suspension is in effect until further notice and is expected to continue so long as the federal COVID-19 disaster declaration remains in place.
The VA expects that lenders will approve COVID-19 forbearance requests for up to six months. If an additional period of forbearance is necessary, it can be extended for up to an additional six months. During the forbearance period, interest accumulates but not late fees or other penalties. Borrowers will need to work with the lender to repay any missed payments. This can be through a single lump sum payment, additional payments to the monthly payments, repayment when the property is sold or refinanced or through a loan modification.
We will continue to provide updates on the various moratoriums as extensions or modifications are announced.