Mortgages financed by Freddie Mac, Fannie Mae, or the federal government have two foreclosure protections. They include a temporary suspension of foreclosures and COVID-19 hardship mortgage forbearance.

These protections were availed to qualified homeowners after the enforcement of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Since then, these protections have been expanded to offer additional help to eligible homeowners under the supervision of Fannie, Freddie Mac, and federal agencies.

Foreclosure Moratoriums

Foreclosure happens when a lender reclaims a property after a homeowner is unable to meet the required mortgage payment obligations. Foreclosure processes vary from state to state. The federal law bars a servicer from commencing a state foreclosure process until the homeowner has defaulted for over 120 days. Exceptions are, however, available based on the homeowner’s forbearance or other types of relief.

In some situations, a reverse mortgage might be an effective way for homeowners to avoid foreclosure. Homeowners should, however, understand that reverse mortgages are risky, costly, and can also be foreclosed.

Temporary Suspension of Foreclosures

Any homeowner with a loan funded by Freddie Mac, USDA, HUD/FHA, or VA is protected from foreclosure until after June 30, 2021. These corporations bar lenders and servicers from starting a court or out-of-court foreclosure against the homeowner. They also prohibit the lenders from completing a foreclosure verdict or sale. This protection came into force on March 18, 2020.

COVID Hardship Forbearance 

A lender or mortgage servicer may allow a homeowner to temporarily suspend or lower mortgage payments while he or she rebuilds his or her finances.  If a homeowner experiences financial difficulty because of the COVID-19 pandemic, he or she may be eligible for COVID hardship forbearance of not less than 180 days. He or she may also be entitled to one or several extensions of this forbearance. These options are, however, not automatic – the homeowner must apply for them before the deadline.

Forbearance doesn’t pardon or erase the homeowner’s payments. He or she is still required to pay back any missed or reduced payments once the forbearance ends. The missed payments are usually repaid over time.

Once the forbearance culminates, the servicer or lender will reach out to the homeowner regarding repayment of the missed mortgage payments. A real estate lawyer can explain to the homeowner the foreclosure rules and options available to him or her in repaying the reduced or missed payments.