The State of Foreclosures During COVID-19

THE STATE OF FORECLOSURES DURING COVID-19

The stage of foreclosures during COVID-19.  In a recent Executive Order, Governor Cuomo addressed the need to provide financial relief to the citizens of New York.

The directive set forth the following:

• Forbearance with respect to mortgage payments for 90 days from the due date for any person or entity facing financial hardship due to the pandemic;
• Refrain from reporting late payments to credit rating agencies for 90 days;
• Offering borrowers an additional 90 day grace period to complete trial loan modifications and ensuring that late payments during the COVID-19 pandemic do not affect their ability to obtain permanent loan modifications;
• Waiving late payment fees and any online payment fees for 90 days;
• Postponing foreclosures and evictions for 90 days;
• Ensuring that borrowers do not experience a disruption of service if the mortgage servicer closes its office, including making other available avenues for borrowers to continue to manage their accounts and make inquiries;
• Lenders to proactively reach out to borrowers via apps, texts, emails or otherwise to explain the assistance being offered to borrowers.

On March 21, 2020, Governor Cuomo issued Executive Order 202.9, which modified Section 39 of the Banking Law by stating “it shall be unsafe and unsound business practice for any bank to not grant forbearance to any person or business who has a financial hardship as a result of the pandemic for a period of 90 days”.

The Order goes on to provide that the Superintendent of the Department of Financial Services must ensure under “reasonable and prudent circumstances” that any licensed or regulated entities provide to any consumer in New York State an opportunity for a forbearance of payments for a mortgage for any person or entity facing a financial hardship due to the COVID 19 pandemic.  The emergency regulations ensure the forbearance application be made widely available for consumers and the application be granted in “all reasonable and prudent circumstances.”

It is important to note it is unclear as to how “financial hardship” will be defined and interpreted. It is expected there will be future guidance.

The Executive Order has made forbearance required and not discretionary.

Additionally, to aid in assistance to homeowners, the U.S. Department of Housing and Urban Development authorized the Federal Housing Administration to put a moratorium on foreclosures for the next two months for single family homeowners unable to pay FHA backed mortgages.

This is not intended to be legal advice.  You should contact an attorney for advice regarding your specific situation.  

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Marcia Jacobowitz is a partner concentrating on commercial and residential real estate, including landlord tenant issues and law.