Understanding Foreclosure Amid the COVID-19 Era

Empowering Homeowners Through Turbulent Times

Jul 16, 2020

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The COVID-19 pandemic created unprecedented financial challenges for millions of American homeowners. In response, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March 2020, which provided temporary foreclosure protections and mortgage forbearance options for borrowers with federally backed home loans.

While those emergency protections have expired, many homeowners today may still experience financial hardship due to job loss, rising living expenses, medical emergencies, or other unexpected life events. Understanding your options early can make a significant difference in avoiding foreclosure and protecting your home.

A Look Back at CARES Act Foreclosure Protections

The CARES Act temporarily introduced several important homeowner protections, including:

A temporary foreclosure moratorium on federally backed mortgages.
The ability for eligible homeowners experiencing COVID-related financial hardship to request mortgage forbearance.
Protection from certain late fees and foreclosure actions during the covered period.

Although these emergency programs are no longer in effect, they demonstrated the importance of communicating with your mortgage servicer as soon as financial difficulties arise.

Understanding the Foreclosure Process

Foreclosure is the legal process a lender may use to recover the remaining balance on a mortgage when payments become seriously delinquent.

Foreclosure laws vary by state and generally fall into one of two categories:

Judicial Foreclosure

In a judicial foreclosure, the lender files a lawsuit, and the foreclosure proceeds through the court system. This process typically takes longer and provides judicial oversight throughout the proceedings.

Non-Judicial Foreclosure

Arizona primarily uses a non-judicial foreclosure process through a Trustee's Sale. This process follows state-specific legal procedures outside of the court system and can move more quickly than judicial foreclosure. Homeowners should understand Arizona's timelines and seek assistance promptly if they begin experiencing payment difficulties.

What to Do If You're Having Trouble Making Mortgage Payments

If you're struggling to make your mortgage payment—or expect financial challenges in the near future—don't wait until you've missed multiple payments. Contact your lender or mortgage servicer as early as possible to discuss available assistance.

Before calling, gather information that may help your lender evaluate your situation, including:

Why you've fallen behind on your mortgage payments.
Documentation supporting your financial hardship, such as medical bills, unemployment paperwork, or reduced income.
Whether your hardship is temporary or long-term.
Any additional financial obligations affecting your ability to make future payments.
Whether you wish to remain in your current home.
Any solutions you believe may work for your situation.

It's also wise to keep detailed notes of every conversation with your mortgage servicer, including dates, times, representative names, and any agreements discussed.

Common Options That May Help Prevent Foreclosure

Every homeowner's situation is unique, and available solutions depend on your loan type, investor guidelines, and eligibility. Some common foreclosure prevention options include:

Reinstatement

Pay the total past-due amount, including any applicable fees, by an agreed-upon date to bring the loan current.

Repayment Plan

Your lender may allow you to repay missed payments gradually by adding a portion of the overdue balance to future monthly mortgage payments.

Mortgage Forbearance

A temporary reduction or suspension of mortgage payments during a period of financial hardship. At the end of the forbearance period, repayment options will depend on your loan program and servicer guidelines.

Loan Modification

A permanent adjustment to your loan terms that may include extending the repayment period, changing the interest rate, or modifying other loan terms to create a more affordable payment.

Selling Your Home

If keeping the home is no longer financially practical, selling the property may allow you to pay off your mortgage while preserving your equity and avoiding foreclosure.

Helpful Resources for Homeowners

If you're facing financial hardship, these organizations offer reliable information and assistance:

Consumer Financial Protection Bureau (CFPB): Foreclosure education and homeowner resources.
U.S. Department of Housing and Urban Development (HUD): HUD-approved housing counseling agencies and foreclosure prevention information.
Homeowner Assistance Fund (HAF): Some states continue to offer assistance programs depending on available funding and eligibility.

Frequently Asked Questions

Can I avoid foreclosure if I contact my lender early?

In many cases, yes. Mortgage servicers often have options available for borrowers experiencing temporary or long-term financial hardship. The sooner you reach out, the more options may be available.

Does foreclosure affect my credit?

Yes. A foreclosure can significantly impact your credit history and may affect your ability to qualify for future financing.

Are foreclosure assistance programs still available?

While the COVID-era CARES Act protections have ended, many lenders continue to offer hardship assistance depending on your loan type and financial circumstances.

Understanding Foreclosure Amid the COVID-19 Era

A Look Back at CARES Act Foreclosure Protections