The Joe Biden administration on Thursday announced that a moratorium on foreclosures and evictions, set to expire at the end of this month, will be extended another 30 days and will now take place on July 31, 2021. This is according to a series of announcements issued by federal agencies including the U.S. Department of Housing and Urban Development (HUD), the Department of Veterans Affairs (VA), the U.S. Department of Agriculture (USDA) and the Consumer Financial Protection Bureau (CFPB) in concert with the White House.
While much of the new effort at combating homelessness through the extension of these moratoriums is focused on renters, homeowners are also designed to benefit from these actions if they have mortgages that are backed by the relevant federal agencies, according to the White House.
HUD also announced on Thursday that previously-described revisions to single-family mortgage servicing and loss mitigation policies on both the forward and reverse sides of the business will have their implementation date delayed. These changes, originally scheduled for implementation in August, includes the codification of new reverse mortgage policies as well as the either outright or partial rescinding of certain Mortgagee Letter (MLs) that have application to the Home Equity Conversion Mortgage (HECM) program.
Relief for homeowners in the deadline extension
The deadline for foreclosures has previously been extended several times over the course of the COVID-19 coronavirus pandemic, but the White House aims to make clear that the extension laid out in today’s announcement will account for the final time this deadline will be pushed.
“Three federal agencies that back mortgages – [HUD, VA, and USDA] – will extend their respective foreclosure moratorium for one, final month, until July 31, 2021,” the White House announcement reads. “The Federal Housing Finance Agency (FHFA) will also announce that it has extended the foreclosure moratorium for mortgages backed by Fannie Mae and Freddie Mac until July 31, 2021.”
Relief for homeowners and renters still recovering from the economic impact of the pandemic simply require additional time to get back on their feet, the announcement says, and the government is averse to a deadline which could exacerbate the housing situations of vulnerable populations.
“Once the moratoria end, HUD, VA, and USDA will take additional steps to prevent foreclosures on mortgages backed by those agencies until borrowers are reviewed for COVID-19 streamlined loss mitigation options that are affordable, while FHFA will continue to work with Fannie Mae and Freddie Mac to ensure that borrowers are evaluated for home retention solutions prior to any referral to foreclosure,” the White House said.
For homeowners who have yet to take advantage of different forbearance options that the government has made available to customers with government-backed mortgages, the relevant backing agencies will extend the deadline for borrowers who need to explore those options out to a later point in the year, as well.
“HUD, VA, and USDA will also continue to allow homeowners who have not taken advantage of forbearance to date to enter into COVID-related forbearance through September 30, 2021, while homeowners with Fannie Mae or Freddie Mac-backed mortgages who have COVID related hardships will also continue to be eligible for COVID-related forbearance,” the White House said. “Finally, HUD, VA, and USDA will be announcing additional steps in July to offer borrowers payment reduction options that will enable more homeowners to stay in their homes.”
Delay in new servicing guidelines
In late April, HUD published an update for forthcoming revisions to the Federal Housing Administration (FHA) Single Family Housing Policy Handbook 4000.1, which also includes the latest version of FHA’s Defect Taxonomy detailing many of the ways that forward and reverse mortgage loans could fall short of approval based on a series of scenarios relating to inadequate or insufficient documentation.
On Thursday with the publication of ML 2021-14, FHA announced that the implementation date for the previously-described changes to the Handbook that mortgagees must use will be pushed out from August 17, 2021 to March 31, 2022. The reason for the implementation delay was also given in this instance as the need for additional recovery time stemming from the economic impact of the pandemic.
“Due to the continued COVID-19 pandemic, Mortgagees are experiencing a large volume of Borrowers impacted by COVID-19 who are seeking loss mitigation assistance,” the new ML reads in part. “HUD recognizes the resources required to implement the changes to Handbook 4000.1 may cause delays in assisting those Borrowers in resolving their delinquencies and avoiding foreclosure. To mitigate the impacts to both Borrowers and Mortgagees, HUD is extending the implementation date to allow Mortgagees additional time to implement the changes.”
The previous guidance outlined that certain MLs that had been issued in the past will be superseded by the new Handbook guidelines, either in full or in part. For those superseded in full, they are all relatively recent releases, with all but one being handed down during the Donald Trump administration and Former HUD Secretary Dr. Ben Carson. The sole exception to this is ML 2021-04, issued on January 26 of this year and which extended and updated guidelines surrounding forbearance requests for mortgage borrowers who have been impacted by the economic effects of the COVID-19 coronavirus pandemic, including the delay of due and payable requests for HECM loans.
The other two MLs superseded in full (2020-48 which applied primarily to manufactured homes and 2019-18 which dealt with limited 203K mortgages, respectively) do not have bearing on the HECM program.
For the MLs superseded in part, ML 2021-05 handed down in February similarly dealt with the foreclosure and eviction moratoria put in place for FHA single-family forward and reverse mortgages. ML 2020-38 dealt with updates to the claims module of FHA’s “Catalyst” software, and does not appear to have any meaningful bearing on the HECM program.