With everything in the news about various programs and protections for people affected by the COVID-19 crisis, it is easy to get confused about exactly what your rights and options are to avoid foreclosure.
On March 18, 2020, the South Carolina Supreme Court issued a moratorium on foreclosures. This stopped all foreclosures during that time, but that moratorium expired on May 15, 2020. Since May 15, foreclosures have been able to proceed, but the lender must certify in writing that they are not barred from proceeding by the federal Coronavirus Aid, Relief, and Economic Security (CARES) Act. If the mortgage company fails to file that certification by the time of the final hearing, the case should be dismissed. The courts have been authorized to hold hearings by telephone, videoconferencing, or in person. When you receive a hearing notice in your foreclosure case, you should read it carefully to determine how you will need to attend.
At the federal level, federal government has issued a moratorium against all federally owned or backed mortgages. These include Federal Housing Administration (FHA) loans, U.S. Department of Urban Development (HUD) loans, Veterans Affairs (VA) loans, U.S. Department of Agriculture (USDA) loans, and those loans guaranteed by Fannie Mae or Freddie Mac. These federally-related mortgages account for approximately 70% of mortgages on single family homes. There are also a number of federally-related mortgages on multi-family housing. This moratorium does not apply to private mortgages that are not owned or backed by the federal government, Fannie Mae, or Freddie Mac. This moratorium was originally scheduled to end on May 17, but it was extended to June 30, 2020. So far, the moratorium has not been extended again, so foreclosures of those mortgages can begin moving forward again starting July 1.
The CARES Act also gave homeowners with federally owned or backed mortgages the right to request a forbearance for up to 180 days. You do not have to provide any documentation to prove that you have suffered a pandemic-related financial hardship – your word alone is enough. During the forbearance, you will not be charged any additional fees or penalties. If your circumstances have not improved by the end of the initial forbearance, you can request that the forbearance be extended for another 180 days. However, you will still owe the money that would come due during this time. Normally, you would have to pay it all in a lump sum at the end of a forbearance period. However, they have instead come up with a number of different options depending on what type of mortgage you have and your current situation:
- Fannie Mae and Freddie Mac offer options to set up a repayment plan (paying extra each month to get caught up), deferral (moving the missed payments to the end of the loan), or loan modifications (changing the terms of the loan to make the payment more affordable).
- The FHA and HUD offer a repayment plan, or a “Standalone Partial Claim,” which places amounts you owe into a junior lien that is repaid when you refinance your mortgage or sell your home, or at the end of your mortgage.
- The USDA offers a repayment plan, or if you request it, a loan extension that defers the missed payments to the end of the loan.
- The VA offers repayment plans or loan modifications, or deferral of the missed payments into a balloon payment (a lump sum due at the end of the mortgage).
If you do not have a federally owned or backed mortgage, your mortgage servicer is not required to give you the CARES Act forbearance. That said, it may still be worthwhile to reach out to your loan servicer to discuss the hardships you are experiencing and request some options to avoid foreclosure. Privately owned mortgage servicers do not necessarily have to offer any of these programs, but many of them still offer some options to help you save your home. Regardless of what type of mortgage you have, these programs are not automatic! You must reach out to your mortgage servicer to request this assistance. If you received a forbearance under the CARES Act, you should reach out again before the forbearance ends to discuss your options regarding how the missed payments will be repaid.