Lynn Woosley is a Senior Director with Treliant. She is a seasoned executive with extensive risk management experience in regulatory compliance, consumer and commercial credit risk, credit and compliance risk modeling, model governance, regulatory change management, acquisition due diligence, and operational risk in both financial services and regulatory environments.
Read: Mortgagee Letter 2020-04 and FHFA Suspends Foreclosures and Evictions for Enterprise-Backed Mortgages
- Sources: hud.gov and fhfa.gov
Treliant knows loss mitigation, loan modifications, and foreclosure compliance. If you need assistance with helping your borrowers, or determining the impact of these releases on your firm’s activities, Treliant can help.
On March 18, 2020, the U.S. Department of Housing and Urban Development (HUD) issued Mortgagee Letter 2020-04, which suspended all foreclosure and evictions of homeowners from single family properties where the mortgage is FHA-insured under Title II. The moratorium applies to both forward and Home Equity Conversion (reverse) mortgages. On the same day, Federal Housing Finance Authority (FHFA) suspended foreclosures and evictions of homeowners whose single-family mortgage is backed by either Fannie Mae or Freddie Mac (jointly, GSEs). Both actions were taken in response to the COVID-19 national emergency, and are intended to provide financial relief to homeowners affected by the coronavirus and allow homeowners to remain in their homes during the national emergency. In both cases, the moratoria are for 60 days. HUD also notes that the deadlines for first legal action and reasonable diligence timelines are extended by 60 days. FHFA has also announced that owners of multi-family properties who are negatively affected by the coronavirus national emergency will be eligible for forbearance as long as the properties do not evict renters who are unable to pay because of coronavirus impact.
On the same day, Fannie Mae and Freddie Mac issued reminders to families affected by COVID-19 to contact their mortgage servicers for assistance. The GSEs are offering a wide range of assistance options in addition to the foreclosure moratorium. Some of the assistance options include forbearance plans to suspend or reduce payments for up to 12 months; suspension of adverse credit bureau reporting during forbearance periods related to the COVID-19 national emergency; waiver of late fees for homeowners in forbearance plans; and permanent modification options when the forbearance period ends. Assistance may be available for primary residences, second homes, and investment properties.
The HUD and FHFA foreclosure suspensions followed local moratoria announced by the cities of Miami-Dade County, Los Angeles, and New York City. In addition, the Consumer Financial Protection Bureau (CFPB) , the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve (FRB), the National Credit Union Administration (NCUA), the Office of the Comptroller of the Currency (OCC), and the Conference of State Bank Supervisors (CSBS) issued a statement that loans in forbearance or modification due to the effects of the coronavirus will not automatically be classified or treated as troubled debt restructurings. The FDIC also issued Frequently Asked Questions for Financial Institutions Affected by The Coronavirus Disease 2019, and the FRB issued SR 20-4/CA 20-3 reminding institutions of supervisory practices regarding banking organizations and their customers affected by a major disaster or emergency.
As lenders work with borrowers experiencing financial distress due the COVID-19, they should take care to ensure the options offered are with all the appropriate regulatory guidance.
For additional information on addressing issues related to COVID-19, please refer to the following:
- Interagency Statement on Pandemic Planning
- Interagency Statement on Loan Modifications and Reporting for FIs Working with Customers Affected by Coronavirus
- FinCEN Encourages FIs to Communicate Concerns Related to COVID-19 and to Remain Alert to Related Illicit Suspicious Activity
- Employee Privacy in the Age of COVID-19
- FINRA Pandemic-Related Business Continuity Planning
- Defending against COVID-19 Cyber Scams
- Mitigating Fraud in the Wake of the Pandemic