How to Handle Mortgage Forbearance Request Under COVID-19

March 31, 2020 at 8:53 am Leave a comment

Good morning, people. I don’t know about you but if I don’t start getting more fresh air, I’m beginning to feel like John Travolta in the Boy in the Plastic Bubble.

Anyway, yesterday’s blog provided an overview of Small Business Administration loans that are going to be administered by eligible lenders. Today, I am going to talk about the Mortgage protection parts of the Corona Virus Aid, Relief and Economic Security Act (H.R. 748).

First, this portion of the bill applies to federally backed mortgage loans, which are secured by a first or subordinate lien on residential real property (including individual units of condominiums and cooperatives) designed principally for the occupancy of from 1- to 4- families that is insured or guaranteed by the federal secondary market including the FHA, Fannie Mae, and Freddie Mac, etc.

The emergency period defined in the federal statute begins with the President’s National Emergency declaration as a result of COVID-19 beginning March 13, 2020. Under the law, a borrower with a qualifying mortgage experiencing a financial hardship “directly or indirectly” as a result of the COVID-19 outbreak may request forbearance. Upon this request, a forbearance “shall be granted” for up to 180 days at the request of the borrower with an extension of an additional 180 days permitted. The forbearance period can be shortened or extended at the borrower’s request.

The only documentation that the servicer must attain is an attestation from the borrower that they are suffering a financial hardship as a result of COVID-19. The simplicity of the federal requirements contrast with the emergency regulations promulgated by New York State.   The good news is that under New York’s emergency regulations mortgages subject to this federal law are explicitly exempted.

The federal law also prohibits any foreclosure actions on federally backed mortgages for at least a 60 day period beginning March 18, 2020. This prohibition does not apply to vacant or abandoned property.

Think of how quickly the world has changed. Had Congress imposed a foreclosure moratorium just three weeks ago, the world would be going berserk. Today, it is an afterthought since states such as New York have closed down their courts to all but essential services.

Entry filed under: Mortgage Lending, Regulatory. Tags: , , .

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Authored By:

Henry Meier, Esq., Senior Vice President, General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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