COLUMBUS — Ohio Attorney General Dave Yost and 34 other attorneys general recommended action to help homeowners in letters sent to the Federal Housing Finance Agency (FHFA) and the Department of Housing and Urban Development (HUD).
“There are so many people seeking relief under the federal program, it is overwhelming the system,” Yost said. “These commonsense rules will help streamline the process and ensure uniformity.”
The bipartisan coalition applauded federal efforts to suspend evictions and foreclosures during the COVID-19 pandemic and expressed appreciation for additional forbearance and foreclosure relief provided by the CARES Act. The coronavirus-relief legislation, signed by President Trump on March 27, provides protections for homeowners whose loans are backed by Fannie Mae, Freddie Mac or other federal entities.
As part of the CARES Act, FHFA and HUD have already adopted streamlined processes for borrowers affected by COVID-19 to enter into forbearance plans, which allow borrowers to pause mortgage payments for a limited time. Currently, once the forbearance period ends, borrowers are asked to either repay the missed payments in a lump sum or enter into a more permanent loss mitigation solution.
Because an unprecedented number of borrowers will need help at essentially the same time, the letters recommend moving the forborne (or missed) payments to the back of the loan term. That would allow immediate relief for homeowners and reduce borrower confusion and concern, while limiting the strain on the mortgage servicing industry.
The letters make three recommendations:
-FHFA and HUD should issue guidance revising their forbearance programs so that forborne payments are automatically placed at the end of the loan’s term.
-FHFA and HUD should expand eligibility for disaster relief loss mitigation programs.
-FHFA and HUD should clarify that the moratorium on foreclosures and evictions applies to all aspects of the foreclosure or eviction process. That includes issuing pre-foreclosure and acceleration notices, posting or publishing any notices, filing or proceeding with motions beyond continuances, or taking any other foreclosure or eviction action during the moratorium.
The protection of the CARES Act applies only to federally backed mortgages, which make up approximately 62 percent of the mortgage market. Borrowers who are not covered should contact their mortgage servicer (the company to which they send their monthly payment) to determine whether it is offering any relief during the pandemic.
Those with a federally backed mortgage have the right to request a forbearance for up to 180 days if in financial hardship due to the coronavirus pandemic. There is also the right to request one extension for up to another 180 days.
The Consumer Financial Protection Bureau (CFPB) offers a guide to coronavirus mortgage relief options on its website.
To determine eligibility for a forbearance plan or other assistance first find out who services the mortgage and whether or not it is a federally backed mortgage.
Those with an ineligible mortgage should contact the servicer or financial institution as they may offer relief to borrowers in different forms such as forbearance or hardship options.
Keep in mind that forbearance does not erase what is owed — missed or reduced payments must be payed in the future.
In addition to Ohio, the coalition includes attorneys general from California, Colorado, Connecticut, District of Columbia, Delaware, Florida, Hawaii, Idaho, Illinois, Iowa, Maine, Maryland, Massachusetts, Michigan, Minnesota, Montana, Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, North Dakota, Oregon, Pennsylvania, Puerto Rico, Rhode Island, South Dakota, Tennessee, Vermont, Virginia, Washington, West Virginia and Wisconsin.