Brought to You By 2 1 9/3/2020 The CARES Act and Mortgage - PDF document

9/3/2020 1 Brought to You By 2 1

9/3/2020 The CARES Act and Mortgage Forbearance 3 The CARES Act and Mortgage Forbearance On March 27, 2020, President Trump signed into law H.R. 748, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). As an emergency act, the CARES Act takes immediate effect but expires on March 26, 2021. A copy of the CARES Act, as enacted, may be found here. 4 2

9/3/2020 The CARES Act and Mortgage Forbearance Modification of a Chapter 13 Plan due to Coronavirus Related Financial Hardship: Section 1329 of the Bankruptcy Code, which sets forth the requirements for modification of a chapter 13 plan after confirmation, is amended to include new section (d). This section provides that a plan may be modified at the request of the debtor, after notice and hearing, if the “debtor is experiencing or has experienced a material financial hardship due, directly or indirectly, to the coronavirus disease 2019 (COVID –19) pandemic.” 5 The CARES Act and Mortgage Forbearance Any plan modified under this provision may be extended up to seven years from the date that the first payment under the original confirmed plan was due. Accordingly, this provision extends chapter 13 plans by up to two years beyond the previous five year limit allowed under the chapter 13. 6 3

9/3/2020 The CARES Act and Mortgage Forbearance Any modification of the plan under this new section (d) shall be made subject to the requirements of Section 1322(a)-(c) and Section 1325, meaning that, except for the length of the plan, any modified plan must comply with the traditional requirements of a chapter 13 plan. 7 The CARES Act and Mortgage Forbearance This new modification provision only applies to cases where plans were confirmed before enactment of the CARES Act on March 27, 2020. This provision automatically expires one year after the date of enactment of the CARES Act. 8 4

9/3/2020 The CARES Act and Mortgage Forbearance Finally, Section 4022 of the CARES Act provides relief from foreclosure as to “Federally Backed Mortgage Loans.” These covered loans include Freddie and Fannie Mae owned loans, HUD Loans, Veteran Home Loans (VA), FHA, Rural Housing, USDA, and other federally guaranteed loans. 9 The CARES Act and Mortgage Forbearance For any covered loan, upon the request of a borrower who attests that she or he is suffering financial hardship due to the COVID-19 Pandemic , and so long as the Federal National Emergency relating to the COVID-19 Pandemic is in place, the borrower is entitled to a 180 day forbearance period without providing further documentation. During this time, no legal fees, late fees, costs, or additional interest can be charged to the loan. 10 5

9/3/2020 The CARES Act and Mortgage Forbearance The CARES Act also appears to prohibit foreclosure on loans already in default so long as the borrower properly requests a forbearance. The borrower may request the forbearance even if the loan is in default. This 180 day forbearance period may be extended one time for an additional 180 day period at the request of the borrower so long as the Federal Emergency is still in place (President could end the Emergency by Executive Order). 11 The CARES Act and Mortgage Forbearance Because most borrowers do not know who the owner of their mortgage loan is, research may be required to determine if an individual borrower is eligible for the relief under this act. If the servicer is unable to informally disclose whether the loan is a covered loan, a Request for Information under 1024.36 of Regulation X of RESPA may be necessary to determine the borrower’s eligibility for forbearance. 12 6

9/3/2020 The CARES Act and Mortgage Forbearance FHFA Extends Foreclosure and REO Eviction Moratoriums On August 27, 2020, the Federal Housing Finance Agency issued the following announcement: 13 The CARES Act and Mortgage Forbearance Today, to help borrowers at risk of losing their home due to the coronavirus national emergency, the Federal Housing Finance Agency (FHFA) announced that Fannie Mae and Freddie Mac (the Enterprises) will extend the moratoriums on single-family foreclosures and real estate owned (REO) evictions until at least December 31, 2020. The foreclosure moratorium applies to Enterprise-backed, single- family mortgages only. 14 7

9/3/2020 The CARES Act and Mortgage Forbearance The REO eviction moratorium applies to properties that have been acquired by an Enterprise through foreclosure or deed-in-lieu of foreclosure transactions. The current moratoriums were set to expire on August 31, 2020. 15 The CARES Act and Mortgage Forbearance “To help keep borrowers in their homes during the pandemic, FHFA is extending the Enterprises' foreclosure and eviction moratoriums through the end of 2020," said Director Mark Calabria. “This protects more than 28 million homeowners with an Enterprise-backed mortgage." 16 8

9/3/2020 The CARES Act and Mortgage Forbearance Currently, FHFA projects additional expenses of $1.1 to 1.7 billion will be borne by the Enterprises due to the existing COVID-19 foreclosure moratorium and its extension. FHFA will continue to monitor the effect of coronavirus on the mortgage industry and update its policies as needed. 17 The CARES Act and Mortgage Forbearance To understand the protections and assistance offered by the government to those having trouble paying their mortgage, please visit the joint Department of Housing and Urban Development, FHFA, and the Consumer Financial Protection Bureau website at cfpb.gov/housing. 18 9

9/3/2020 The CARES Act and Mortgage Forbearance CARES Act Section 4022 19 The CARES Act and Mortgage Forbearance (b) FORBEARANCE. — (1) IN GENERAL. — During the covered period, a borrower with a Federally backed mortgage loan experiencing a financial hardship due, directly or indirectly , to the COVID – 19 emergency may request forbearance on the Federally backed mortgage loan, regardless of delinquency status, (A) submitting a request to the borrower’s servicer; and (B) affirming that the borrower is experiencing a financial hardship during the COVID – 19 emergency. 20 10

9/3/2020 The CARES Act and Mortgage Forbearance (2) DURATION OF FORBEARANCE. — Upon a request by a borrower for forbearance under paragraph (1), such forbearance shall be granted for up to 180 days, and shall be extended for an additional period of up to 180 days at the request of the borrower, provided that, at the borrower’s request, either the initial or extended period of forbearance may be shortened. (3) ACCRUAL OF INTEREST OR FEES. — During a period of forbearance described in this subsection, no fees, penalties, or interest beyond the amounts scheduled or calculated as if the borrower made all contractual payments on time and in full under the terms of the mortgage contract, shall accrue on the borrower’s account. 21 The CARES Act and Mortgage Forbearance (c) REQUIREMENTS FOR SERVICERS. — (1) IN GENERAL. — Upon receiving a request for forbearance from a borrower under subsection (b), the servicer shall with no additional documentation required other than the borrower’s attestation to a financial hardship caused by the COVID – 19 emergency and with no fees, penalties, or interest (beyond the amounts scheduled or calculated as if the borrower made all contractual payments on time and in full under the terms of the mortgage contract) charged to the borrower in connection with the forbearance, provide the forbearance for up to 180 days, which may be extended for an additional period of up to 180 days at the request of the borrower, provided that, the borrower’s request for an extension is made during the covered period, and, at the borrower’s request, either the initial or extended period of forbearance may be shortened. 22 11

9/3/2020 The CARES Act and Mortgage Forbearance Section 4021 Credit Protection During COVID-19 – Amends 15 USC 1681S-2(a)(1) of the Fair Credit Reporting Act as follows: ‘‘(ii) REPORTING.— Except as provided in clause (iii), if a furnisher makes an accommodation with respect to 1 or more payments on a credit obligation or account of a consumer, and the consumer makes the payments or is not required to make 1 or more payments pursuant to the accommodation, the furnisher shall — 23 The CARES Act and Mortgage Forbearance ‘‘(I) report the credit obligation or account as current; or ‘‘(II) if the credit obligation or account was delinquent before the accommodation — ‘‘(aa) maintain the delinquent status during the period in which the accommodation is in effect; and ‘‘(bb) if the consumer brings the credit obligation or account current during the period described in item (aa), report the credit obligation or account as current. ‘‘(iii) EXCEPTION.— Clause (ii) shall not apply with respect to a credit obligation or account of a consumer that has been charged- off.’’. 24 12

9/3/2020 The CARES Act and Mortgage Forbearance COVID-19 Forbearance Script for Servicer Use with Homeowners 25 The CARES Act and Mortgage Forbearance Step 1: Determine Nature of Hardship ▪ Let’s get started. ▪ Are you calling because of a problem you’re having with making your monthly mortgage payments? If the Homeowner answers “yes”: ▪ Tell me about your situation and how it is affecting your financial circumstances. ➢ NOTE TO SERVICER: Ask appropriate questions to elicit details about the Homeowner’s situation. ▪ Is the financial hardship directly or indirectly related to the COVID-19 National Emergency? 26 13