The COVID-19 pandemic has caused financial difficulty for many families throughout the United States. Many businesses have been forced to close or scale back their operations, resulting in widespread job losses or reductions in work hours. Many people who are struggling to pay their regular expenses have defaulted on their mortgage payments, putting them at risk of losing their homes. Fortunately, federal and state governments have placed a moratorium on foreclosures, ensuring that families will not be forced out of their homes in addition to the other difficulties they are facing. While the current foreclosure moratorium lasts through June 30, 2021, the Consumer Financial Protection Bureau (CFPB) has proposed an extension of the moratorium through the end of the year.

Details of the CFPB’s Proposal

Based on an analysis of data by the CFPB, around three million homeowners in the United States are behind on their mortgage payments. While the foreclosure moratorium has allowed many of these homeowners to receive forbearance on mortgage payments, the CFPB estimates that this forbearance period will end for around 1.7 million homeowners in September of 2021. This could result in a massive wave of foreclosures that could cause millions of families to be displaced from their homes.

To address this issue, the CFPB has proposed an extension of the prohibition against foreclosures through December 31, 2021. This would give homeowners more time to figure out how to pay off the amounts they owe and resume ongoing payments. The CFPB is also proposing a streamlined process for allowing lenders to offer loan modifications to homeowners. This would reduce the amount of paperwork required to make these types of modifications, allowing homeowners to begin making affordable mortgage payments more quickly. The proposed rule would limit modifications to agreements that would not increase the amount of a homeowner’s monthly payments and that would not extend the term of a loan for more than 40 years after the date of modification.

UPDATE: If you are considering reinstatement as an option for avoiding foreclosure, you will want to be sure to understand your rights, the deadlines that you will need to meet, and what other options may be available. The deadline for reinstating your loan is 90 days after you were served with a foreclosure notice. By this deadline, you will be required to make up the missed payments and pay other fees and expenses. In addition to late fees, you may need to pay other costs related to foreclosure proceedings, such as attorney's fees, recording fees, court costs, and the costs of a home inspection. You will need to request a quote from your lender for the total amount that must be paid to reinstate the loan. If you disagree with the amount provided in this quote, you can send a notice of error disputing the amount. Once you have met the requirements for reinstatement, the foreclosure case will be dismissed. It is important to note that after you have exercised your right to reinstatement, you will not be able to use this form of relief for five years after the date of the dismissal.

Another option that may be available is to pay off your loan in full. This is known as "redemption." To pay off the loan, you may be able to refinance your home through a loan from another lender, or you may receive a personal loan or gift from a person such as a family member. Typically, the deadline for redemption of your loan is seven months after the date you were served with a notice of foreclosure, although there may be some exceptions depending on your individual situation. As with reinstatement, you can request a payoff quote from your lender that will detail the full amount that will need to be paid, which will include the principal of the loan, any applicable late fees or interest, and foreclosure-related expenses.

If you have questions about reinstatement, redemption, loan modifications, or other options for foreclosure defense, contact our Waukegan foreclosure lawyers at 847-549-0000 to schedule a free consultation.

When a family experiences financial difficulties, they may be unable to make mortgage payments, which may cause their lender to begin the process of foreclosure. While the possibility of losing a home can be hard enough for a family, in some cases, they may be required to make additional payments even after the foreclosure process is completed. If the sale of a home during foreclosure does not fully cover the amount owed on the mortgage, a lender may pursue a deficiency judgment against the borrower and attempt to collect the remaining amount. However, borrowers have a number of options that can help them avoid a deficiency judgment and additional financial obligations.

Options for Avoiding Deficiency Judgments

The best way to eliminate the possibility of a deficiency judgment is to stop the foreclosure process altogether. There are a variety of foreclosure defense strategies available, including negotiating mortgage loan modifications that will allow a borrower to become current on their mortgage and continue making payments. However, if foreclosure cannot be avoided, borrowers may have other options for avoiding further liability, including:

• Consent foreclosure - A borrower may make an agreement with their mortgage lender in which they will not contest the foreclosure of the home, and the lender will waive their rights to a deficiency judgment once the foreclosure process is complete.

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Homeowners who encounter financial difficulties can sometimes struggle to make mortgage payments. Unfortunately, if a person defaults on their mortgage, their lender may begin foreclosure proceedings, which could ultimately result in the loss of their home. Those who are having trouble meeting their financial obligations will want to understand the foreclosure process and the potential defense strategies that may be available.

Steps Followed in a Foreclosure

A homeowner will be considered to have defaulted on their mortgage if they fail to make payments on time or in full. After the first missed payment, a person may receive notification from their lender that they will be charged late fees, and after a second missed payment, the lender will usually advise the borrower that they may face legal action if they do not become current on their payments. After a third missed payment or delinquency of at least 90 days, the lender may contact the homeowner letting them know that they will be beginning foreclosure proceedings. This process will involve the following steps:

1. Demand letter - At least 30 days before filing a foreclosure lawsuit, the lender must send the homeowner a notice that they are in default. This letter will provide details about how the borrower has failed to meet their obligations, describe what needs to be done to become current on mortgage payments, and provide a deadline for when payments must be made.

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After nearly a year, the COVID-19 pandemic is continuing to affect people across the United States. Even though vaccines are currently being administered, they are being rolled out slowly, and it will most likely be several more months before enough people can be vaccinated to allow a return to the activities that people enjoyed before the pandemic. Unfortunately, this means that those who have been struggling financially may continue to face difficulty and uncertainty for the time being. However, federal and state government organizations have offered a variety of different forms of relief, and programs may be available to help homeowners who have been affected by COVID-19 avoid foreclosure.

Foreclosure Moratorium Extended

The Coronavirus Aid, Relief, and Economic Security (CARES) Act, which went into effect in March of 2020, placed a moratorium on foreclosures and evictions for single-family homes with mortgages backed by the Federal Housing Administration (FHA). While this moratorium was initially intended to last through July 24, 2020, it has been extended several times as the pandemic has continued to affect people and families. Most recently, the FHA announced that the moratorium will extend through February 28, 2021. The moratorium applies to new foreclosure proceedings and any foreclosures which are already in process.

Options for Mortgage Forbearance

In addition to the moratorium on foreclosures, the FHA is allowing homeowners to request a forbearance from mortgage lenders. A forbearance will allow a homeowner to defer or reduce mortgage payments for up to six months, and it may be extended for an additional six months if needed. The Consolidated Appropriation Act (CAA), which was passed by the U.S. Congress on December 27, 2020, prohibited lenders from denying forbearances or foreclosure relief to lenders who had previously filed for bankruptcy or who are involved in bankruptcy proceedings.