Articles Posted in Coronavirus

Forbearance on your mortgage

On April 27, 2020, the Federal Housing Finance Administration (FHFA) clarified misinformation that servicers and lending institutions have provided to homeowners. The FHFA clarification will only apply to mortgages that are owned by Fannie-Mae or Freddie-Mac. Specifically, you will not have to make a lump sum payment at the end of any forbearance for loans owned by Fannie-Mae or Freddie-Mac. Click here to learn if Fannie-Mae owns your mortgage, or click here to see if Freddie-Mac owns your mortgage. Check both sites.

If Freddie or Fannie owns your mortgage, then you are entitled to a six-month forbearance

Servicers are offering forbearance agreement to protect against foreclosure from the Covid-19 Pandemic.  The question is “should I sign a forbearance agreement?

Forbearance means “patient self-control; restraint and tolerance. The action of refraining from exercising a legal right, especially enforcing the payment of a debt.”  Agreement is the “situation in which people have the same opinion, or in which they approve of or accept something .  .  .”

In considering a forbearance agreement, the first question that you should ask is “forbearance from what?”  Is it forbearance from filing for foreclosure?  Forbearance from taking steps to enforce the terms of the mortgage?  Forbearance from filing a foreclosure is a part of forbearance from enforcing a debt.  Under federal law a homeowner must be 120 days late before a lender can file for foreclosure:

This is a follow up blog to Coronavirus and Foreclosures, Sales and Evictions and Coronavirus and Foreclosure

Maryland has stopped all evictions, including those resulting from foreclosure sales.    The question is, should you, the homeowner, take any proactive steps if you fear that you will not be able to meet your mortgage payments?  Maryland will still allow foreclosures to be filed, but upon filing, the actions will be stayed. I am actively encouraging feedback from the homeowners, substitute trustees, servicers and lenders.

Should you be Proactive and Contact Your Servicer That you may be in Trouble?

Don’t fall into a trap by those who suggest that you do not have to pay your mortgage. You do. The issue is, if you cannot pay your mortgage, what you can do to prevent foreclosure.

On March 18, 2020, President Trump announced that he was implementing steps to halt foreclosures, sales and evictions until the end of April. Click here to read the article. The Federal Housing Finance Agency said that the halt on foreclosure would last at least sixty-days.  Stopping foreclosures, sales or evictions does not allow you to stop paying your mortgage.

The real question is whether banks and servicers will stop filing foreclosures, selling properties or evicting people.  Maryland has ordered that all sales and evictions are stopped.

Covid-19 Pandemic and Foreclosure

The Great Recession of 2008 wreaked  havoc on homeowners who could not afford to pay their mortgage.  Maryland was among the top three states affected.  Prior to the Covid-19 Pandemic, Maryland still ranks among the top three states in the amount of foreclosures per capita.  Lessons from the Great Recession can teach us what servicer scams to avoid.

Before the Covid-19 Pandemic, Maryland ranked among the top three states in the amount of foreclosures per capita

People purchase homes to succeed, not to fail.  People purchase homes in which to live and raise families, not to default on loans and have a bank kick them out into the street.

A bank is a source of money; it is not a source of comfort.  If you are looking for an entity with a heart, look toward your church, synagogue, mosque or a rich uncle.  A bank has no heart.

While lacking a heart, a bank has something that you do need – money.  It can be your money, someone else’s money, the government’s money or the bank’s money  When buying a house you need what the bank has, money.  In Maryland, here is how it generally works:

Loopholes in the Prior Law:

In 2007 the Maryland Legislature closed a loophole in the licensing statute.   The original statute defined a debt collector as one “who engages directly or indirectly in the business of .  .  . collecting for, or soliciting from another, a consumer claim.”  A debt collector in Maryland had to be licensed.  A debt collector collects the debt of another.  If you owed money to your doctor, the doctor did not have to be licensed to collect the bill.  However, if the doctor turned the debt over to a collection agency, the collection agency had to be licensed as a debt collector.

Businesses started to purchase delinquent debt for discounted amounts, and collect the debt themselves.  To accomplish this, businesses formed entities outside of Maryland.  These entities were called a foreign statutory trust.  Since the foreign statutory trusts were collecting their own debt, they were not required to be licensed in Maryland.