As a response to the COVID-19 pandemic, Congress passed the American Rescue Plan Act of 2021, commonly referred to as the COVID-19 Stimulus Package. Within this bill is the Homeowners Assistance Fund (HAF), a program to prevent mortgage delinquencies and defaults, foreclosures, loss of utilities and displacement of homeowners experiencing financial hardship as a result of the COVID-19 pandemic.
Distribution of the Homeowners Assistance Fund
Under HAF, the U.S. Department of Treasury is distributing more than $9.9 billion to all 50 states. The Florida Department of Economic Opportunity (DEO) is designated to manage and operate HAF on behalf of the state. Florida’s approach to administering HAF is targeted to help homeowners become current on their mortgage and remain in their home. If a Florida homeowner has applied for HAF, this could impact the foreclosure process of many servicers, lenders, creditors, and investors.
How the HAF Affects Florida Loan Servicers
If a Florida homeowner applies for HAF, the first step is to ensure if they are eligible. In Florida, you must be a Florida homeowner and requesting assistance for the primary residence. Additionally, you must have experienced a financial hardship that occurred or continued to occur after January 21, 2020.
Finally, you must meet income qualifications of being less than or equal to 150% of the Area Median Income (AMI) or 100% of the median income of the United States, whichever is greater. A Florida homeowner must also include specific documents with your application.
Why Use the COVID-19 Homeowners Assistance Fund?
The Consumer Financial Protection Bureau (CFPB) has strongly encouraged loan servicers to participate in HAF programs to assist homeowners to ensure borrowers are not improperly referred to foreclosure. Additionally, the CFPB, has encouraged loan servicers to provide training and information regarding the HAF program to ensure accurate information about the loss mitigation process, including when applicable, accurate information about the servicer’s participation in the HAF program.
As of April 06, 2022, the Federal Housing Finance Agency required Fannie Mae and Freddie Mac will require servicers to suspend foreclosure activities for 60 days if a borrower applied for assistance under HAF and if the servicer was notified that a borrower has applied for assistance from the Treasury Department’s Homeowner Assistance Fund.
Homeowner Loan Servicer Standards
Both Fannie Mae and Freddie Mac offered different standards under which a loan servicer is required to delay or suspend foreclosure. Fannie Mae issued an updated letter on May 04, 2022 addressed to “All Fannie Mae Single-Family Servicers”. This letter stated the servicer must delay initiating any judicial or non-judicial foreclosure process, moving for a foreclosure judgment or order of sale, or executing a foreclosure sale up to 60 days if:
- the servicer receives notification from a mortgage assistance fund program provider participating in the HAF program, such as a housing finance agency or other designee, that the borrower has applied for mortgage assistance;
- the servicer:
- has sufficient time to delay initiation of the foreclosure process or moving for a foreclosure judgment or order of sale; or
- in the case of a foreclosure sale, is notified at least 7 days before the sale; and
- any foreclosure trial or execution of a foreclosure sale can be delayed without dismissal of action.
The letter continues to state if “the servicer determines that it did not have sufficient time to delay initiation of the foreclosure process or moving for a foreclosure judgment or order of sale, the servicer must document in the loan file why it was unable to delay the action and make any supporting documentation available to Fannie Mae upon request”.
Additional Homeowners Assistance Fund Policies
Freddie Mac issued a bulletin on April 06, 2022 stating similar policy. Their bulletin stated servicers must suspend all foreclosure actions, including foreclosure sales, the initiation of any judicial or non-judicial foreclosure process, move for foreclosure judgment or orders of sale, for up to 60 days if:
- the Servicer has been notified that the Borrower has applied for assistance under HAF; and
- any foreclosure proceeding or execution of a foreclosure sale can be delayed without dismissal of the action; and
- the servicer has sufficient time to suspend initiation of the foreclosure process or moving for a foreclosure judgment or order of sale; and
- in the case of a foreclosure sale, the servicer is notified at least 7 days before the sale.
Similar to Fannie Mae, Freddie Mac then stated if the servicer determines it did not have sufficient time to suspend the foreclosure action, the servicer must document why it was unable to delay and make available supporting documents upon request.
Why Is Consultation for Florida Loan Servicers Important?
Both require servicers to delay or suspend judicial or non-judicial foreclosure activities for a required amount of time. There are also additions to standards relating to delaying foreclosures if a borrower applies for HAF.
For instance, if a borrower is approved and funds have been disbursed pursuant to HAF, but the funds do not reinstate the loan. Depending on the loan, a servicer might have to obtain a Qualified Right Party Contract to resolve remaining delinquency issues. Therefore, it is important for Florida loan servicers consult with experienced attorneys to navigate Florida foreclosures post COVID-19.