As Americans are encouraged or directed to stay in their homes due to the COVID-19 pandemic, and as economic dislocation and disruption spreads, federal and state governmental attention has increasingly focused on the mortgage servicing industry. Mortgage servicers should take special care to comply with legal requirements and regulatory directives during this time, and should consult with regulatory agency contacts and legal counsel as appropriate.
Federal Foreclosure and Eviction Moratoriums and Other Actions
On March 18, 2020, U.S. Department of Housing and Urban Development ("HUD") Secretary Ben Carson authorized the Federal Housing Administration ("FHA") to implement an immediate foreclosure and eviction moratorium for single family homeowners with FHA-insured mortgages for the next 60 days. The guidance issued applies to homeowners with FHA-insured Title II Single Family forward and Home Equity Conversion (reverse) mortgages, and directs mortgage servicers to:
- Halt all new foreclosure actions and suspend all foreclosure actions currently in process; and
- Cease all evictions of persons from FHA-insured single-family properties.
The Federal Housing Finance Agency ("FHFA") has also directed Fannie Mae and Freddie Mac to suspend foreclosures and evictions for at least 60 days due to the coronavirus. The foreclosure and eviction suspension applies to homeowners with a Fannie Mae- or Freddie Mac-backed single-family mortgage. Earlier this month, the FHFA also announced that Fannie Mae and Freddie Mac would provide payment forbearance to borrowers impacted by the coronavirus allowing for a mortgage payment to be suspended for up to 12 months due to hardship caused by the coronavirus.
The FHFA has also announced that Fannie Mae and Freddie Mac will offer multifamily property owners mortgage forbearance with the condition that they suspend all evictions for renters unable to pay rent due to the impact of coronavirus. This forbearance is available to all multifamily properties with a Fannie Mae- or Freddie Mac-backed performing multifamily mortgage negatively affected by the coronavirus national emergency.
New York Actions
On March 19, 2020, the New York State Department of Financial Services ("DFS") issued guidance to "urge" regulated and exempt mortgage servicers to alleviate the adverse impact caused by COVID-19 on those mortgage borrowers ("mortgagors") who demonstrate they are not able to make timely payments, including taking reasonable and prudent actions, and subject to the requirements of any related guarantees or insurance policies, to support those adversely impacted mortgagors by:
- Forbearing mortgage payments for 90 days from their due dates;
- Refraining from reporting late payments to credit rating agencies for 90 days;
- Offering mortgagors an additional 90-day grace period to complete trial loan modifications, and ensuring that late payments during the COVID-19 pandemic do not affect their ability to obtain permanent loan modifications;
- Waiving late payment fees and any online payment fees for a period of 90 days;
- Postponing foreclosures and evictions for 90 days;
- Ensuring that mortgagors do not experience a disruption of service if the mortgage servicer closes its office, including making available other avenues for mortgagors to continue to manage their accounts and to make inquiries; and
- Proactively reaching out to mortgagors via app announcements, text, email or otherwise to explain the above-listed assistance being offered to mortgagors.
The next day, on March 20, 2020, New York Governor Andrew Cuomo issued Executive Order 202.8, providing that for the period through April 19, 2020, "[t]here shall be no enforcement of either an eviction of any tenant residential or commercial, or a foreclosure of any residential or commercial property for a period of ninety days."
On March 21, 2020, Governor Cuomo issued Executive Order 202.9, which requires the Superintendent of DFS to ensure under reasonable and prudent circumstances that licensed or regulated entities provide to New York consumers the opportunity for forbearance of mortgage payments due to financial hardship due to the COVID-19 pandemic.
On March 24, 2020, DFS Superintendent Lacewell promulgated new Part 119 of Title 3 of the Official Compilation of Codes, Rules and Regulations of the State of New York on an emergency basis in response to Executive Order 202.9. Section 119.3(a) requires New York regulated institutions to (i) make applications for forbearance of any payment due on a residential mortgage of a property located in New York, widely available to any individual who resides in New York and who demonstrates financial hardship as a result of the COVID-19 pandemic; and (ii) subject to the safety and soundness requirements of the regulated institution, grant such forbearance for a period of ninety (90) days to any such individual. The regulation does not apply to mortgage loans made, insured, or securitized by certain federal government agencies, instrumentalities, government-sponsored enterprises, or a Federal Home Loan Bank.
Section 119.3(c) requires New York-regulated institutions to e-mail, publish on their websites, mass mail, or otherwise similarly broadly communicate to customers how to apply for COVID-19 relief. This notification must take place as soon as possible, but in no event later than 10 days after the March 24, 2020 promulgation of Part 119. Among other things, Part 119 also requires regulated institutions to follow-up promptly on information omitted from customers' COVID-19 relief applications and to respond to requests for COVID-19 relief immediately, and in no event later than ten business days after receipt of all reasonably required information.
Mortgage servicers should continue to monitor for guidance and directives from regulatory agencies, as the situation is changing rapidly and new guidance and directives may continue to be issued.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.