With the economic turmoil and many incomes affected from the Corona Virus, HUD Secretary Ben Carson announced a temporary foreclosure moratorium for homeowners with an FHA loan:
“Today’s actions will allow households who have an FHA-insured mortgage to meet the challenges of COVID-19 without fear of losing their homes, and help steady market concerns,” said HUD Secretary Ben Carson. “The health and safety of the American people is of the utmost importance to the Department, and the halting of all foreclosure actions and evictions for the next 60 days will provide homeowners with some peace of mind during these trying times.”
The full press release by HUD can be found here.
Unfortunately, this is only in effect for FHA loans. For this with other loans, I expect similar announcements from other secondary market investors such as VA, Fannie Mae and Freddie Mac.
All of the Government Sponsored Enterprises (known as “GSE’s”) have had FEMA programs already in place for Forbearance when an certain area is designated as a Federal Disaster area. It has yet to be determined if servicers will implement the forbearance program. In my experience, it’s been a case-by-case basis and it was implemented during the wildfires of 2018 in Orange and Riverside Counties.
Will this help homeowners?
Unfortunately, the only people this will help are people that have already been in the foreclosure process. It would halt proceedings. If your loan doesn’t belong to FHA, there hasn’t been a moratorium announced as of today I’m aware of.
For the foreclosure timeline, here’s a video I created back in 2009 or so. (disregard the website mentioned as I no longer have that domain)
In regards to Forbearance, it’s an option where a servicer will suspend payments for a certain amount of time while the principal balance increases. Here are the links on the Fannie Mae and Freddie Mac websites. FEMA must declare a federal disaster in their system for these programs to take effect. I know they’ve announced a “Federal Disaster” but we’ll see if that means all the applicable programs usually directed at local disasters apply. It’s worth asking about from your servicer.
In the end, eviction moratoriums for renters, foreclosure moratoriums, and forbearance programs only “kick the can down the road” and simply buys a homeowner or renter time. Even scarier, all the options mentioned can create a larger issue of a growing backlog of money owed. Negotiating these amounts are never guaranteed.