What to Do If You’re Facing Foreclosure or Falling Behind on Your Mortgage in the COVID-19 Era
Note: This article was last updated on March 1, 2021 and some of the information included may no longer be up-to-date.
***If you have any questions about this information or your situation, please call our agency. The situation is changing rapidly and while we are trying to keep information as up-to-date as possible you should call us for the most up-to-date information.***
New York and the rest of the world is currently experiencing a pandemic due to an outbreak of coronavirus (COVID-19 or novel coronavirus). What does this mean for foreclosures?
New York State Hold on Foreclosures
On December 28, 2020 New York Governor Andrew Cuomo signed the COVID-19 Emergency Eviction and Foreclosure Prevention Act of 2020 (S.9114/A.11181), which prevents residential evictions, residential foreclosure proceedings, tax lien sales and tax foreclosures, credit discrimination, and negative credit reporting up until May 1, 2021. The New York Courts website has more information about the Act, including relevant documentation and forms.
The COVID-19 Emergency Eviction and Foreclosure Prevention Act placed a moratorium on all foreclosure proceedings for 60 days through February 26, 2021. Additionally, homeowners can submit a hardship declaration to have their foreclosures placed on hold through May 1, 2021. The foreclosure moratorium applies to homeowners and landlords who own ten or fewer residential units.
Homeowners whose income or financial circumstances have been impacted by the COVID-19 pandemic can submit a hardship declaration form to their mortgage lender or other foreclosing party to protect themselves against foreclosure until May 1, 2021. If a homeowner submits a hardship declaration, they will still owe their unpaid mortgage after May 1, 2021. Similarly in tax lien or tax foreclosure cases, foreclosure proceedings may be stayed but the homeowner will still owe tax payments to the relevant locality.
A hardship declaration is a formal statement given to a mortgage lender or foreclosing party to declare that a homeowner has endured hardship during the COVID-19 pandemic. This declaration protects homeowners from facing foreclosure proceedings through May 1, 2021. Among other reasons, a homeowner is able to submit a hardship declaration if they are unable to pay their mortgage due to a significant loss of household income or an increase in necessary out-of-pocket expenses related to COVID-19. The hardship declaration form can be found here.
Federal Hold on Foreclosures
On February 16, 2021, President Joe Biden announced that federal agencies would be extending the federal foreclosure moratorium through June 30, 2021.
What happens if I have a pending foreclosure case?
This depends upon who owns your mortgage. Please see below for information on how to find out what type of mortgage loan you have.
If you have a loan from Fannie Mae, Freddie Mac, HUD/FHA, VA, or USDA, lenders and servicers are prohibited from starting a foreclosure case against you and from finalizing foreclosure judgments and sales until after June 30, 2021.
If you have any other type of loan, all foreclosure proceedings were stayed through February 26, 2021 by New York State law. This protection can be extended through May 1, 2021 if you submit a hardship declaration form. If you have questions about your case, you can contact the court’s Coronavirus Telephone Hotline at 833-503-0447.
What happens if I am behind on my mortgage but haven’t been sued yet?
Normally, a lender could start a foreclosure case by filing a summons and complaint in the state Supreme Court where the property is located. But under the New York COVID-19 Emergency Eviction and Foreclosure Prevention Act of 2020, foreclosure proceedings could not be filed through February 26, 2021. This protection can be extended through May 1, 2021 if you submit a hardship declaration form. If you have a loan from Fannie Mae, Freddie Mac, HUD/FHA, VA, or USDA, lenders and servicers are prohibited from starting a foreclosure case against you and from finalizing foreclosure judgments and sales until after June 30, 2021.
See the section below for information on what to do if you can’t pay your mortgage due to COVID-19.
What happens if I can’t pay my mortgage due to COVID-19?
Many, but not all, lenders have options to help homeowners facing economic hardship due to COVID-19. One of the main options that most banks are offering is something called a forbearance. A forbearance is a reduction or suspension of mortgage payments for a set amount of time. Forbearance is not forgiveness of unpaid mortgage payments. Lenders will still require you to repay those missed payments. Repayment plans include paying the full amount at the end of a forbearance, adding an extra amount to your monthly payments, and, or adding the amount to the end of your loan. Alternatively, some lenders may require you to apply for a loan modification at the end of the forbearance period.
A loan modification is the most common way that homeowners catch up on their mortgage payments to avoid foreclosure. With a loan modification you keep your contract with the bank, but you agree to modify or change some of the terms of that agreement. Modifications may include changing your principal balance, interest rate, or years you have to repay the loan. If you qualify for a loan modification, most banks require a trial period plan (TPP) first. This is a trial to see if you can get back on track and make your payments at the new amount. If you successfully make your payments with the TPP, then you may be eligible for a permanent modification.
Here’s a rundown of what major lenders are offering to homeowners in trouble:
All Federally Backed Loans: Federally backed loans include Fannie Mae, Federal Housing Administration (FHA), Freddie Mac, United States Department of Agriculture (USDA), and Veterans Administration (VA) loans. If your mortgage is a federally backed mortgage, the Coronavirus Aid, Relief, and Economic Security (CARES) Act gives you the right to request a forbearance up to 180 days. You also have the right to request an extension for another forbearance up to 180 additional days. If you have endured financial hardship because of COVID-19, you may contact your lender to request this forbearance. You do not need to submit additional documentation to qualify. Your deadline to request the initial forbearance depends on who backs your loan.
If your loan is a Fannie Mae or Freddie Mac loan and you already received a forbearance prior to February 28, 2021, you may request up to two additional three-month extensions, up to a maximum of 18 months of total forbearance.
You can look up whether your loan is federally backed and protected under the CARES Act here. There are more details about each of these types of loans below.
Fannie Mae Loans: Fannie Mae provides mortgage insurance to lenders protecting them from the risk that a loan may become delinquent. This means lenders backed by Fannie Mae have to follow its rules. Fannie Mae has ordered lenders to offer forbearance options if homeowners are facing a financial hardship because of COVID-19. Under Fannie Mae’s rules and the CARES Act, you are able to request an initial forbearance up to 180 days and an extension of the initial forbearance up to 180 additional days. If you already received a forbearance prior to February 28, 2021, you may request up to two additional three-month extensions, up to a maximum of 18 months of total forbearance. Fannie Mae is accepting verbal statements of the homeowner being impacted by coronavirus. There is no current deadline to request a forbearance. You can look up whether your loan is a Fannie Mae loan here. Fannie Mae has also ordered lenders to not report negative activity related to your mortgage to the credit reporting bureaus if you fall behind because of COVID-19.
Federal Housing Administration (FHA) Loans: FHA provides mortgage insurance, protecting lenders from the risk that a loan may become delinquent, for regular mortgages as well as reverse mortgages (FHA is the main provider of reverse mortgages in the United States). This means that lenders backed by FHA have to follow its rules. Under President Biden’s executive order, FHA has extended its foreclosure moratorium through June 30, 2021. FHA has ordered lenders to offer forbearance options if homeowners are facing a financial hardship because of COVID-19. Under FHA’s rules and the CARES Act, you are able to request an initial forbearance up to 180 days and an extension of the initial forbearance up to 180 additional days. If you started a forbearance plan on or before June 30, 2020, you may request up to two additional three-month extensions, up to a maximum of 18 months of total forbearance. All late charges, fees, and penalties will be waived during a forbearance. The deadline to request a forbearance is June 30, 2021. At the end of a forbearance, homeowners can get a second mortgage from their lenders called a “partial claim.” FHA has developed the COVID-19 Standalone Partial Claim to assist with repayment. If you were current or less than 30 days delinquent as of March 1, 2020, you may be entitled to this option. This mortgage will not require payments and will only have to be paid if the property is sold or transferred. You can see if your loan is an FHA loan by checking your loan documents for a reference to FHA or the U.S. Department of Housing and Urban Development (HUD, of which FHA is a part) or you can call FHA’s National Servicing at 1-800-CALL FHA (800-225-5342). FHA has also ordered lenders to not report negative activity related to your mortgage to the credit reporting bureaus if you fall behind because of COVID-19.
Freddie Mac Loans: Freddie Mac provides mortgage insurance to lenders protecting them from the risk that a loan may become delinquent. This means lenders backed by Freddie Mac have to follow its rules. Freddie Mac has ordered lenders to offer forbearance options if homeowners are facing a financial hardship because of COVID-19. Under Freddie Mac’s rules, you are able to request a forbearance up to 12 months. If you already received a forbearance prior to February 28, 2021, you may request up to two additional three-month extensions, up to a maximum of 18 months of total forbearance. All penalties and late fees will be waived during a forbearance. Freddie Mac is accepting verbal statements of the homeowner being impacted by coronavirus. There is no current deadline to request a forbearance. Freddie Mac has also told lenders to offer special loan modifications if you are facing a financial hardship because of COVID-19. You can look up whether your loan is a Freddie Mac loan here. Freddie Mac has also ordered lenders to not report negative activity related to your mortgage to the credit reporting bureaus if you fall behind because of COVID-19.
United States Department of Agriculture (USDA) Loans: The USDA provides mortgage insurance through the Section 502 Guaranteed Loan Program to help lenders provide low- and moderate-income households the opportunity to own houses in rural areas. This means lenders have to follow the USDA’s rules. The USDA has extended its foreclosure moratorium through June 30, 2021. The USDA has ordered lenders to offer forbearance options if homeowners are facing a financial hardship because of COVID-19. Under the USDA’s rules, USDA direct home loan borrowers are able to request an initial forbearance up to 12 months and an extension of the initial forbearance up to 12 additional months. Under the USDA’s rules and the CARES Act, all other borrowers are able to request an initial forbearance up to 180 days and an extension of the initial forbearance up to 180 additional days. The deadline to request a forbearance is June 30, 2021.
Veterans Administration (VA) Loans: The VA provides mortgage insurance to Service Member, Veteran, and surviving spouse lenders protecting them from the risk that a loan may become delinquent. The VA has extended its foreclosure moratorium through June 30, 2021.The VA has ordered lenders to offer forbearance options if homeowners are facing a financial hardship because of COVID-19. Under the CARES Act, you are able to request an initial forbearance up to 180 days and an extension of the initial forbearance up to 180 additional days. There is no current deadline to request a forbearance.
Bank of America: Homeowners affected by COVID-19 and with Bank of America mortgages, home equity lines of credit, or home equity loans can request a payment deferral or forbearance. The Bank of America Payment Deferral Program is available for customers who have only one payment due on their loan. You are able to defer three payments and extend the term of your loan by three months. Extensions may be available after this initial three month period, up to a maximum of 12 months. The Bank of America Payment Forbearance Program is available for customers who have more than one payment due on their loan (for example, one missed payment and one payment currently due). You are able to request a forbearance period of three months. Extensions may be available after this initial three month period, up to a maximum of 12 months. You can submit a request for a payment deferral or payment forbearance on your mortgage, home equity line of credit, and/or home equity loan here. Bank of America will not report negative activity related to your mortgage to the credit reporting bureaus if you fall behind because of COVID-19.
Mr. Cooper: Homeowners affected by COVID-19 and with federally backed loans (Fannie Mae, FHA, Freddie Mac, USDA, VA) administered by Mr. Cooper can request the Pandemic Forbearance Plan. You are able to request an initial forbearance of 3 to 6 months and an extension of the initial forbearance up to a total of 12 months. You can submit your request for the Pandemic Forbearance Plan here.
M&T Bank: Homeowners affected by COVID-19 and with M&T loans can request a mortgage forbearance. You are able to request a forbearance here. This assistance will most likely result in a modification of your loan once the hardship has passed. Modifications typically include extending the term of your loan which will result in an increase in the total interest paid for your loan.
Ocwen/PHH: Homeowners affected by COVID-19 and with Ocwen/PHH loans can request a mortgage forbearance. You are able to request a forbearance here. All late fees will be waived during a forbearance. Ocwen/PHH will not report negative activity related to your mortgage to the credit reporting bureaus if you fall behind because of COVID-19.
Other Loans: If your loan is not covered by any of these categories, you should talk to your lender directly about what options are available to you.