Understanding Foreclosure Amid the COVID-19 Era

At the onset of the COVID-19 pandemic, the magnitude of its impact on the US, from a public health and economic perspective, was shrouded in uncertainty. To safeguard homeowners, President Donald Trump ratified a $2.2 trillion economic stimulus package, The Coronavirus Aid, Relief, and Economic Security (CARES) Act, on March 27th. This Act established two vital provisions for homeowners with federally supported mortgages:

1. A foreclosure moratorium.
2. The right to forbearance for homeowners facing financial hardships due to COVID-19.

Since the enactment of these measures, the US has witnessed a surge in COVID-19 cases, with states such as Florida, Idaho, and Arizona reporting a staggering 858% increase in infections compared to May's figures. Despite several months of quarantine and phased reopening in states with lower case counts, states experiencing spikes are grappling with the potential for additional mandatory shutdowns. Consequently, the threat of foreclosure continues to be a pressing concern for many homeowners.

Pandemic-era Foreclosure Protection Measures

Upon the introduction of the CARES Act, lenders and mortgage servicers were prohibited from initiating foreclosures for 60 days, starting from March 18th, 2020. This period of protection has since been extended until August 31st, 2020. During this interval, homeowners were exempt from late fees and eviction from their properties. Moreover, homeowners facing financial hardship due to the pandemic had the right to request and receive a forbearance period of up to 180 days. As we collectively navigate the uncertainties of the current economy and financial future, it's our hope that these foreclosure prevention measures will continue for as long as necessary. It remains essential to stay informed about existing foreclosure protection mechanisms until it is clear whether the CARES Act period will be extended.

Foreclosure Fundamentals

Under regular conditions, foreclosure processes vary from state to state. They are typically classified as either judicial or non-judicial foreclosures. In a judicial foreclosure, the party seeking to foreclose files a lawsuit, and the case is adjudicated in court. Conversely, in a non-judicial foreclosure, the party looking to foreclose adheres to a state-specific, out-of-court set of procedures to foreclose the home.

Proactive Measures

If you're facing difficulties with your mortgage payments or anticipate problems in the near future, it is crucial to consult with your lender or mortgage servicer at the earliest. Ignoring due payments is not a feasible solution. Prompt discussions with your lender can facilitate a mutually agreeable payment plan. To ensure effective communication, prepare necessary documentation and information that your lender may require. Consider the following points:

1. The reasons behind your missed mortgage payments.
2. Supporting documents for your financial difficulties, like medical bills or termination papers.
3. Whether your payment problem is temporary or long-term.
4. Any potential financial issues that could hinder future payments.
5. Whether you intend to retain your current home.
6. What potential solutions seem most viable to you.

It's advisable to document all communications with your mortgage servicer, including the names of representatives, times and dates of conversations, and agreed-upon outcomes.

Strategies to Circumvent Foreclosure

Foreclosure prevention measures differ from lender to lender, but common solutions may include:

1. Reinstatement: Pay the entire past-due amount, including late fees or penalties, by a mutually agreed date.
2. Repayment Plan: The lender allows a specified period to repay missed payments by incorporating them into future, regular payments.
3. Forbearance: A temporary pause or reduction of mortgage payments for a specified period.
4. Loan Modification: Permanent changes to the terms of your mortgage contract, such as a reduced interest rate or an extended loan term.
5. Selling Your Home: This option is less ideal but could provide the necessary funds to repay the mortgage.

Key Resources

To learn more about foreclosures, repayment plans, and financial counseling, consider the following resources:

1. The Consumer Financial Protection Bureau for foreclosure information.
2. HUD.gov for details on foreclosure scams and recovery after foreclosure.
3. The Making Home Affordable (MHA) Program for access to free counseling services or the hotline at 1 (888) 995-HOPE.

CrossCountry Mortgage is here to support you throughout this process. Get in touch with our team of local, licensed Mortgage Advisors today.