HUD Suspends Evictions and Foreclosures Amidst COVID-19 Uncertainties

Disruptions caused by the novel Coronavirus (COVID-19) continue to mount in March as economic turbulence worsens. The U.S. Government, in conjunction with the Federal Reserve, has begun combatting inevitable economic downturn through a series of social policies—the latest of which suspends evictions and foreclosures for homeowners.

“The Department of Housing and Urban Development (HUD) is providing immediate relief to renters and homeowners by suspending all foreclosures and evictions until the end of April,” said President Trump at a White House briefing on Wednesday, March 18.

The federal announcement follows many similar state-level policies already in practice. Major metropolitan hubs like Denver, Seattle, San Francisco and San Antonio suspended evictions earlier in the month, citing a disproportionate number of affected communities. New York also suspended evictions statewide, and Boston set the moratorium for 90 days, with assessments of the pandemic every 30 days.

Who does this apply to?

The federal government’s suspension of evictions extends to all homeowners with mortgages insured by the Federal Housing Administration (FHA), a HUD agency.

The Federal Housing Finance Agency (FHFA) announced a similar suspension on foreclosures and evictions for homeowners with mortgages backed by Fannie Mae or Freddie Mac.

Both agency’s official policies extended the moratorium for 60 days, with the possibility of extension pending the status of the COVID-19 crisis.

Previously, the FHFA and HUD reminded mortgage servicers of their options for borrowers affected by the COVID-19 outbreak.  Included among those options is payment forbearance, which would allow affected borrowers to suspend their mortgage payment for up to 12 months due to hardship caused by the coronavirus.

A strategic approach to alleviating economic stress

The goal is twofold—to provide immediate relief for mortgage paying households affected by the loss of income, and to alleviate any possibility of a spike in foreclosures affecting lenders. Foreclosure means realizing losses on the sale of mortgage-backed securities, effectively hampering a lender’s ability to continue issuing affordable mortgages to low-income borrowers.

Recent numbers cite unemployment at an unprecedented 20 percent by the end of the year in a worst-case scenario. Placing a moratorium on mortgages and evictions is a proactive measure of stability for the economy. Data-backed research from past eras of economic turbulence shows correlation between evictions and foreclosures, and the overall severity and duration of recession.

As the stress of the COVID-19 pandemic continues to mount, greater stimulus is likely needed to prevent a larger economic collapse. The federal moratorium on evictions and foreclosures is a smart, strategic step in reassuring the confidence of people without a certain future of income or employment.

If you are having difficulty paying your mortgage, we recommend you reach out to your mortgage servicer as soon as possible to discuss your options.

If you have questions regarding how this applies to you, don’t hesitate to contact James Moore’s Real Estate CPAs for more information.

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