FHA and GSEs Extend Forbearance Policy and Foreclosure Moratoriums

FHA, Fannie Mae, and Freddie Mac recently issued COVID-19 related updates with respect to servicing.  FHA published Mortgagee Letter 2021-15, Freddie Mac issued Bulletin 2021-23, and Fannie Mae updated Lender Letter 2021-02, all of which extend the previously announced foreclosure moratoriums through July 31, 2021.  The moratorium for each requires servicers to suspend all foreclosure actions, including foreclosure sales, initiation of any judicial or non-judicial foreclosure process, and move for foreclosure judgment or order of sale.  This restriction does not apply to mortgages on property deemed vacant or abandoned. 

In ML 2021-15, FHA also updated certain requirements and flexibilities related to borrowers impacted caused by COVID-19, including: 

• Updating FHA’s forbearance policy, by extending the date to request an initial forbearance to September 30, 2021, such that between July 1, 2021, and September 30, 2021, (i) borrowers who request an initial COVID-19 forbearance will receive, at most, a six-month forbearance or payment pause, and (ii) borrowers who begin their initial forbearance will receive an additional three-month extension to the COVID-19 forbearance;
• Establishing a new COVID-19 Advance Loan Modification policy, requiring mortgagees to review eligible borrowers for a permanent change in one or more terms of the borrower’s mortgage that achieves at least a 25% reduction to the borrower’s monthly principal and interest payment that does not require borrower contact; and
• Extending the deadline to September 30, 2021, for HECM borrowers to request an extension before the servicer may request the loan be called due and payable, such that between July 1, 2021, and September 30, 2021, (i) borrowers who request an initial extension will receive, at most, a six-month extension, and (ii) borrowers who begin their initial HECM extension period began between July 1, 2020, and September 30, 2020, will receive an additional three-month extension.

Additionally, in LL-2021-02, Fannie Mae also addressed the gap between the foreclosure moratorium expiration (i.e., July 31, 2021) and the August 31, 2021, effective date of the recently issued CFPB final rule entitled “Protections for Borrowers Affected by the COVID-19 Emergency under the Real Estate Settlement Procedures Act” (the “Final Rule”).  The Final Rule will, among other things: (i) establish certain temporary procedural safeguards to help ensure that borrowers have a meaningful opportunity to be reviewed for loss mitigation prior to servicers initiating the first notice or filing required for foreclosure on certain mortgages, and (ii) temporarily permit servicers to offer certain loan modifications, based on the evaluation of an incomplete application, to borrowers impacted by a COVID-19-related hardship.  In LL-2021-02, Fannie Mae prohibits servicers from taking any action, between July 31, 2021, and August 31, 2021, that would violate the Final Rule if it were in effect during that period. 

Finally, LL-2021-02 also announces updated provisions regarding the suspension of foreclosure-related activities and filing motions for relief from the automatic stay in certain bankruptcy cases.

See WBK’s prior coverage of the foreclosure moratoriums here.