Foreclosures During COVID Pandemic
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The federal CARES Act was signed by President Trump on March 27, 2020, which covers certain residential single family and multifamily property with connections to the federal government. In addition, some people who have mortgages guaranteed by the federal government may have some additional protections. Here is some information about how those protections may apply.
Is my property covered by the federal CARES Act?
The CARES Act provides additional protections for people with residential property that is financed by a federally connected mortgage loan. This includes both single family and multifamily homes, although the protections are different for each of those types of housing. Here are types of federal connected loans:
- FHA & VA guaranteed loans. Check your mortgage document. If it is guaranteed by FHA or VA, it will say that in the mortgage document itself.
- FHA/HUD Home Equity Conversion Mortgage (HECM) reverse mortgages.
- Fannie Mae & Freddie Mac. You can see if your loan is guaranteed by either of these companies by using this online lookup tool.
- USDA. There are two kinds of USDA loans, direct and guaranteed.
- Direct USDA loans involve making payments directly to the federal government.
- It can be a little harder to tell if you have a guaranteed loan. The best way to find out whether your loan is USDA guaranteed is to check the "HUD 1 settlement statement" you should have gotten when the loan closed on your home. If a box labeled FmHA, RHS, or USDA is checked, then you might have a USDA guaranteed loan.
My mortgage lender / servicer already filed for foreclosure against me and got a judgment. Can I be removed?
If your mortgage is a federally connected residential mortgage (see above), then the CARES Act stopped all foreclosures -- no matter where they were in the process. This moratorium on foreclosures, including foreclosure sales and evictions after a sale, has been extended until June 30, 2021 for USDA, FHA, VA mortgages, and Fannie Mae and Freddie Mac mortgages.
My mortgage lender / servicer already filed for foreclosure against me but hasn't gotten a judgment yet. What happens now?
See the answer to the previous question. For federally connected residential mortgages, all filed foreclosure cases must stop at whatever stage they are at until the end of the moratorium period. This includes summary judgment hearings or any other case deadline.
My lender / servicer has not filed a foreclosure, but I am behind on my payments. I received a notice telling me I had to pay a certain amount of money within 30 or 14 days. How do these new laws affect me?
Lenders / servicers are required to send a notice to borrowers in default that tells them how much they are behind, and then give them 30 days to pay, before they can file for foreclosure. In addition, lenders / servicers also have to send a “14-day notice of acceleration” before they file for foreclosure if they want to be able to collect attorney fees from you. Our interpretation of the law is that any such notices given during the foreclosure moratorium are invalid. The lender / servicer will have to start the process again after the end of the moratorium.
Isn’t this moratorium just delaying the inevitable if I can’t pay my mortgage? Is there any help I can get to reduce or temporarily stop my payments?
If you experience financial hardship due to the coronavirus pandemic, you may have a right to an initial COVID hardship forbearance of up to 180 days. You also may have the right to one or more extensions of that forbearance. You must request these options - they're not automatic!
If your loan is backed by HUD/FHA, USDA, or VA, the deadline or requesting an initial forbearance is June 30, 2021. If your loan is backed by Fannie Mae or Freddie Mac, there is not currently a deadline for requesting an initial forbearance.
You must contact your loan servicer to request this forbearance. There will be no additional fees, penalties, or additional interest (beyond scheduled amounts) added to your account. You do not need to submit additional documentation to qualify other than your claim to have a pandemic-related financial hardship. If you are facing financial hardships, you should ask for forbearance immediately.
If you already have a forbearance plan and need more time, you can request an extension. If your mortgage is backed by Fannie Mae, Freddie Mac, or the federal government, you are entitled to a 180-day extension of your COVID hardship forbearance if you request it.
- If your mortgage is backed by Fannie Mae or Freddie Mac: You may request one additional three-month extension, up to a maximum of 15 months of total forbearance. But to qualify, you must be in a COVID forbearance plan as of February 28, 2021, so don't delay contacting your mortgage servicer if you're having trouble paying your mortgage and are not in a forbearance plan.
- If your mortgage is backed by HUD/FHA, USDA, or VA: You may request up to two additional three-month extensions, up to a maximum of 18 months of total forbearance. But to qualify, you must have started a forbearance plan on or before June 30, 2020. Not all borrowers will qualify for the maximum. Check with your mortgage servicer about the options available.
- Deferral: At the end of your forbearance, you may be eligible for a deferral of your delinquent mortgage payments. This means that your past due payments will be put on the back end of your mortgage and your loan will be current. You should check with your mortgage servicer to apply for a deferral.
- Modification: You may be eligible for a modification of your mortgage after your forbearance. This will bring your mortgage current and make your payments more affordable. You can check with your mortgage servicer to apply for a modification or contact Iowa Mortgage Help (877-622-4866) - a free service - to get help in applying for a modification.
Many mortgage lenders / servicers might offer their own programs to help homeowners. You should ask them if they can help you. Before signing a modification or forbearance agreement, it can be a good idea to talk to a lawyer first. People who cannot afford an attorney may be eligible for services from Iowa Legal Aid.
I don’t have a mortgage, but I do have a land contract. Do these laws cover forfeiture of land contracts?
Land contracts are not covered by the CARES Act.
Iowa Legal Aid Provides Legal Help to Low-Income Iowans
To apply for help from Iowa Legal Aid:call 800-532-1275.
- Iowans age 60 and over, call 800-992-8161 or apply online at iowalegalaid.org
- If Iowa Legal Aid cannot help, look for an attorney on “Find A Lawyer” on the Iowa State Bar Association website iowabar.org. A private attorney there can talk with you for a fee of $25 for 30 minutes of legal advice.
- As of March 18, 2020, our offices are closed for walk-ins until further notice, due to the coronavirus outbreak.
*As you read this information, remember this article is not a substitute for legal advice.