Category: Foreclosure Defense

In late August, the Department of Housing and Urban Development (HUD) extended the ban on evictions and foreclosures until 2021, protecting more than eight million homeowners with single-family mortgages. The agency had previously only extended loan forgiveness on single family home mortgages that were insured and backed by the Federal Housing Administration through the end of August.

Below, we discuss which mortgages are not covered by this development, the most recent executive order on the issue, and what other protections might be available to those facing eviction or foreclosure at this time and in the future.

What Is Not Included

Note that this extension does not include residential mortgages backed by Freddie Mac and Fannie Mae; government-run companies that guarantee approximately 50 percent of the entire US residential mortgage market, both of which last extended moratoriums on evictions and foreclosures on single-family homes through August 31.

In spite of the moratorium placed on foreclosures by the state of Florida, Fannie Mae, and Freddie Mac through December 31, 2020, the recession brought about by the pandemic is going to bring about a significant spike in foreclosures. Specifically, according to housing experts, once that the mortgage forbearance period ends, between 200,000 and 500,000 defaults and foreclosures are expected, reflecting a 70 percent increase in foreclosures alone over the next two years.

In addition, Florida has already been hard hit: According to the latest reports, the sunshine state had the country’s second highest foreclosure filing rate in August, with Jacksonville having the highest foreclosure rate of any metro area in the entire country, and Lakeland, Miami, and Ocala also among the top metro areas with high foreclosure rates as well. In addition, according to the Federal Housing Finance Agency, the recession will also cause Fannie Mae and Freddie Mac loan losses more than $4 billion, which will inevitably be passed onto consumers.

On July 29, Florida Gov. Ron DeSantis issued Executive Order 20-180, extending the moratorium on evictions and foreclosures in Florida until September 1 due to the coronavirus pandemic. Failing to do so could have left thousands of Floridians homeless, as, unfortunately, many expect a deluge of foreclosures and evictions once the moratorium is lifted. In fact, according to reports, a number of landlords have already filed paperwork to evict their tenants once that the ban is lifted.

Similarly to the original Executive Order (20-94), relief in these circumstances is limited to residential tenants and single-family mortgagors adversely affected by COVID-19, and does not cover commercial tenants. Still, state politicians called on DeSantis to put in place additional plans to ensure long-term housing security – both during and after the pandemic – for mortgagors and residential tenants, as they claim that the governor has ignored important proposals necessary to assemble a more sustainable plan for Florida.

In mid-June, federal eviction and foreclosure moratoriums were extended for an additional two months; Specifically, Fannie Mae and Freddie Mac announced that they will extend moratoriums on evictions and foreclosures on single-family homes until August 31. Those who cannot make mortgage payments have the opportunity to seek for forbearance through the Coronavirus Relief and Economic Security (CARES) Act, which has allowed them to reduce or delay payments for up to one year, while those who do not have government backed loans may also be able to obtain forbearance, depending upon their lenders.

In addition, the US Department of Housing and Urban Development also extended loan forgiveness on single-family mortgages insured within the Federal Housing Administration (FHA) program through the end of August, and these efforts were also joined by the Federal Housing Finance Agency. While the moratorium extension specifically applies to homeowners who have FHA-insured Title II Single Family Forward and home equity conversion/reverse mortgage, all servicers have been ordered to halt foreclosure actions and cease evictions of anyone renting single-family properties with the program.

As the eviction and foreclosure suspensions put in place in Florida and elsewhere expire, a foreclosure housing crisis is potentially on the horizon for millions of Americans who are currently unable to make payments due to COVID-19’s effects on employment. In Florida, the governor’s order places a halt on foreclosures and evictions through August 1, 2020, and the federal CARES Act only prohibits lenders and servicers from initiating foreclosure proceedings until August 31, 2020, leaving a number of residents to potentially face a host of legal actions after that.

According to available statistics, more than four million residential mortgage loans were in forbearance as of the end of June, and many of them have been still been receiving foreclosure notices from banks during the pandemic in spite of the moratorium, as it only bars judges and law enforcement from finalizing the proceedings until after August 1. While previous reports found that Florida (alongside New Jersey) had 24 out of 50 of the top most at-risk counties in the country, according to recently-released data, Flagler and Hernando Counties will be hit hardest during the second quarter.

While many think of the housing crisis as a thing of the past, in fact, a decade later, it still haunts a number of homeowners, especially in Florida, where many have to deal with foreclosure defense on a daily basis. Just between 2007 and 2016, there were close to eight million foreclosures in the U.S.

For those affected, losing their home isn’t just a matter of losing their most valuable asset, but of losing the source of countless memories of holidays, birthdays, graduations, and other important moments in their lives. It also means that their credit is destroyed, and any future mortgage that they pay will include a very high interest rate.

The Disparities Are Often Racial and Income-Based In Nature

Although the homeownership rate has rebounded in recent years, it remains well below the high it reached immediately prior to the foreclosure crisis. As of the summer of 2018, only approximately 64 percent of all households own their home.

The First District Court of Appeal of Florida recently held that although HUD (Department of Housing and Urban Development) regulations are a condition precedent to foreclosure, borrowers must raise the issue and timely challenge any foreclosing bank’s compliance with the regulation in order to rely on these regulations in challenging a foreclosure.

In this case, the bank sought to foreclose a mortgage secured by a promissory note issued to the borrowers. The loan note specifically contained a provision providing that if the borrower defaulted by failing to pay in full any monthly payment, then the lender could require immediate payment in full of the principal balance remaining due, as well as all accrued interest, also known as “accelerating payment.”

HUD Regulations & Exemptions

The mortgage established the bank’s remedies in the instance the borrower defaulted on the loan, subject to limitations set forth by HUD regulations. Specifically, the issue in this case involved the right for borrowers to have a face-to-face interview with the mortgagor under some circumstances, but only if the mortgaged property was not located within 200 miles of the mortgagee, its servicer, or a branch office of either (amongst other exemptions). The trial court ruled in favor of the bank’s argument that the right to a face-to-face interview did not apply because the branch did in fact exist within 200 miles of the property.

Recently, the Florida Supreme Court ruled that lenders can refile foreclosure cases against homeowners who are still in default, even if the case was initiated more than five years ago (i.e. past the statute of limitations). This effectively now gives banks in the state the right to bring cases back to life, meaning that delinquent Florida homeowners may now be getting foreclosure notices after years of delay (more than five years). This latest ruling effectively provides the lenders with as much leeway as they need to start foreclosure proceedings all over again, but it’s important to note that there are caveats to the ruling in terms of foreclosure defense.

What the New Foreclosure Ruling Means

This ruling has left many homeowners concerned, as some experts have indicated that this could allow the banks to resolve open foreclosures and place more and more homes up for sale. In general, when homeowners stop making payments, many of them hope to get their mortgage modified. However, lenders have the option of, instead, filing a foreclosure action.