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Financial Services Law Insights and Observations


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  • VA extends suspension of certain property inspection requirements for Covid-19 forbearance cases

    Federal Issues

    On December 21, the Department of Veterans Affairs (VA) issued Circular 26-21-27 to extend the suspension of certain inspection requirements for properties purchased with loans guaranteed by the VA where the borrower has been negatively impacted by Covid-19. In 2020, the VA temporarily suspended its requirement to conduct a property inspection before the 60th day of delinquency for borrowers whose loans are currently in forbearance and were current or had not reached the 60th day of delinquency when the borrower requested CARES Act forbearance. Circular 26-21-27 sunsets on October 1, 2022.

    Federal Issues Department of Veterans Affairs Covid-19 Consumer Finance CARES Act Mortgages Servicing Forbearance

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  • VA extends Covid-19 loan deferment, clarifies forbearance timeline

    Federal Issues

    On September 29, the Department of Veterans Affairs issued circulars providing updates for servicers on assisting borrowers who continue to be affected by the Covid-19 pandemic. According to Circular 26-21-19, servicers may continue to offer loan deferments as a home retention option to borrowers exiting a Covid-19 forbearance period. Servicers who select this option will defer repayment of principal, interest, taxes, and insurance “to the loan maturity date or until the borrower refinances the loan, transfers the property, or otherwise pays off the loan (whichever occurs first) and with no added costs, fees, or interest to the borrower, and with no penalty for early payment of the deferred amount.” The VA’s Covid-19 Home Retention Waterfall and Covid-19 Refund Modification guidance, issued in July (covered by InfoBytes here), provides that the loan deferment option may be used in situations where a borrower indicates that he or she can resume normal monthly guaranteed loan payments but cannot repay the arrearages. Additionally, the VA notes that in order “to relieve undue prejudice to a debtor, holder, or other person,” it is “temporarily waiving the requirement that the final installment on any loan shall not be in excess of two times the average of the preceding installments.” This waiver, the agency notes, is applicable only to VA’s Covid-19 Home Retention Waterfall cases. The Circular is rescinded July 1, 2023.

    The same day, the VA also issued Circular 26-21-20 to clarify timeline expectations for forbearance requests submitted by affected borrowers. “For borrowers who have not received a COVID-related forbearance as of the date of this Circular, servicers should approve requests from such borrowers provided that the borrower makes the request during the National Emergency Concerning the Novel Coronavirus Disease 2019 (COVID-19) Pandemic.” The VA states that it expects all Covid-19 related forbearances to end no later than September 30, 2022.

    Federal Issues Department of Veterans Affairs Forbearance Consumer Finance Mortgages Covid-19

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  • Agencies extend Covid-19 eviction moratorium

    Federal Issues

    On July 30, USDA, HUD, the VA, and FHFA extended their foreclosure-related eviction moratoria until September 30. The extensions follow President Biden’s July 29 announcement, which asked federal agencies to extend their respective eviction moratoria through the end of September following the expiration of the CDC’s moratorium on residential evictions on July 31. While Biden called on Congress to pass legislation to extend the eviction moratorium following a recent U.S. Supreme Court ruling, which stated that “clear and specific congressional authorization (via new legislation) would be necessary for the CDC to extend the moratorium past July 31”, emergency legislation to extend the federal eviction moratorium through the end of the year did not pass the U.S. House. 

    USDA extended its eviction moratorium for homeowners of properties financed or guaranteed by USDA through September 30 and reminded servicers that the single family foreclosure moratorium will expire on July 31. After this date, no new foreclosure filings should occur until homeowners are reviewed for new options to reduce their payments and stay in their homes, USDA noted.

    FHA also announced the extension of its eviction moratorium for foreclosed borrowers and their occupants through September 30. The moratorium applies to homeowners with FHA-insured Title II Single Family forward and Home Equity Conversion (reverse) mortgages, excluding legally vacant or abandoned properties (see Mortgagee Letter 2021-19). The extension is intended to ensure borrowers with FHA-insured mortgages are not immediately displaced from their homes. FHA also noted the expiration of the foreclosure moratorium on July 31.

    Additionally, VA Circular 26-21-14 extends eviction relief for properties previously secured by VA-guaranteed loans (including properties in VA’s Real Estate Owned (REO) portfolio through September 30, excluding vacant or abandoned properties.

    Further, FHFA announced that Fannie Mae and Freddie Mac (GSEs) will extend their moratorium on single-family REO evictions until September 30. The current moratorium was set to expire July 31. The REO eviction moratorium applies only to properties that have been acquired by the GSEs through foreclosure or deed-in-lieu of foreclosure transactions. FHFA also encouraged landlords of Fannie Mae or Freddie Mac-backed properties to apply for Emergency Rental Assistance (ERA) before beginning the process of evicting a tenant for non-payment of rent, and directed tenants and landlords to the CFPB’s online Rental Assistance Finder

    Federal Issues Covid-19 FHA FHFA USDA Department of Veterans Affairs Foreclosure Evictions Biden CDC CFPB

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  • Agencies announce additional actions to prevent Covid-19 foreclosures

    Federal Issues

    On July 23, President Biden announced additional actions taken by HUD, the VA, and USDA, which are intended to ensure stable and equitable recovery from disruptions caused by the Covid-19 pandemic and prepare homeowners to exit mortgage forbearance. According to the Biden administration, the goal of these new measures is to bring homeowners with HUD-, VA-, and USDA-backed mortgages closer in alignment with options provided for homeowners with Fannie Mae- and Freddie Mac-backed mortgages (covered by InfoBytes here). Specifically, mortgage servicers will be required or encouraged to offer new payment reduction offers to assist borrowers.

    • HUD. FHA announced enhanced Covid-19 recovery loss mitigation options to help homeowners with FHA-insured mortgages who have been financially impacted by the pandemic. Mortgagee Letter (ML) 2021-18 supersedes previously issued FHA-loss mitigation options, and will, among other things, require mortgage servicers to offer a zero-interest subordinate lien option to eligible homeowners who can resume their existing mortgage payments under the “COVID-19 Recovery Standalone Partial Claim” option. For borrowers that are unable to resume their monthly mortgage payments, FHA established the “COVID-19 Recovery Modification” option, which extends the term of a mortgage to 360 months at market rate and targets a 25 percent principal and interest (P&I) reduction for all eligible borrowers. Servicers may start offering the options as soon as operationally feasible but must begin using the new options within 90 days. These additional options supplement FHA Covid-19 protections published last June (covered by InfoBytes here), which extended the foreclosure and eviction moratorium, expanded the Covid-19 forbearance and home equity conversion mortgage extension, and established the Covid-19 advance loan modification.
    • VA. The VA also announced it will offer a new “COVID-19 Refund Modification” option to assist veterans impacted by the pandemic who need a significant reduction in their monthly mortgage payments. Under the plan, the VA will be able to purchase a veteran’s past-due payments and unpaid principal—subject to certain limits—“depending on how much assistance is necessary,” and, in certain circumstances, veterans will be able to receive a 20 percent payment reduction (certain borrowers may be eligible to receive a larger reduction). Mortgage servicers will modify the loan to ensure veterans can afford future mortgage payments. Similar to the VA’s “COVID–19 Veterans Assistance Partial Claim Payment” (covered by InfoBytes here), the deferred indebtedness will be established as a junior lien, which will not accrue interest, will not require monthly payments, and will only become due once the property is sold or the guaranteed loan is paid off or refinanced. The option is available through September 30, 2021.
    • USDA. The agency announced new Covid-19 special relief measures, as well as clarifications to existing policies, for servicing borrowers impacted by the pandemic. USDA noted that Chapter 18 Section 5 of Handbook-1-3555 will be expanded to include “COVID-19 Special Relief Alternatives,” which includes an option that targets a 20 percent reduction in a borrower’s monthly P&I payments and offers “a combination of interest rate reduction, term extension and mortgage recovery advance.” These measures are immediately available and will be effective through December 31, 2022. Eligible borrowers must occupy the property, must not be more than 120 days past due on March 1, 2020, and must have received an initial forbearance due to a pandemic-related hardship before September 30, 2021.

    Federal Issues Covid-19 Consumer Finance Mortgages Loss Mitigation Biden HUD Department of Veterans Affairs USDA Mortgage Servicing

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  • VA issues circular on pandemic-affected borrowers

    Federal Issues

    On June 25, the Department of Veterans Affairs issued Circular 26-21-10, which provides an update for servicers on assisting borrowers who are affected by the Covid-19 pandemic. According to the circular, servicers should continue reporting the Electronic Default Notification with “National Emergency Declaration” as the default reason in cases that involve borrowers who are financially affected by the pandemic. In addition, “servicers are to continue to make every reasonable effort to assist borrowers who are experiencing financial difficulties due to the national emergency.” These efforts must be documented in servicers’ loan systems and are to include a servicer review of relevant loan files and consideration of all possible home retention options and alternatives to foreclosure. For borrowers who have not received a Covid-related forbearance, servicers should allow these borrowers to receive a such forbearance if the borrower makes the request by September 30. The circular also establishes that all properties securing VA-guaranteed loans are subject to moratoriums on foreclosures and evictions through July 31, 2021. excluding vacant or abandoned properties. The circular is rescinded effective July 1, 2023.

    Federal Issues Covid-19 Department of Veterans Affairs Forbearance

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  • Waters urges foreclosure moratoria extension

    Federal Issues

    On June 21, Chairwoman of the House Financial Services Committee Maxine Waters (D-CA) sent a letter to several federal agencies “urging them to administratively extend their moratoria on foreclosures at least until the CFPB is able to finalize and implement its pandemic recovery mortgage servicing rule.” As previously covered by a Buckley Special Alert, the Bureau issued a proposed rule in April that would broadly halt foreclosure initiations on principal residences from August 31, 2021 until 2022, and change servicing rules to promote consumer awareness and processing of Covid-relief loss mitigation options. The proposed rule also would create new and detailed obligations for communicating with borrowers to ensure they are aware of their loss mitigation options for pandemic-related hardships.

    The letter, which was sent to the secretaries of HUD, the Department of Agriculture, the Department of Veterans Affairs, as well as the director of FHFA and the acting director of the CFPB, stresses that many homeowners will face the risk of foreclosure when the emergency federal foreclosure mortarium expires on June 30, as the Bureau’s proposed rule is not expected to take effect until August. This gap in critical protections, Waters cautions, “could result in servicers expediting efforts to initiate foreclosures before a final rule takes effect, especially for borrowers who have not been able to access forbearance options during the pandemic[.]” The letter requests not only an extension of the current foreclosure moratoriums but also urges the Bureau to finalize the rule (or issue an interim final rule if necessary) as soon as possible to prevent unnecessary foreclosures and ensure homeowners have the opportunity to finalize affordable loan modifications. Additionally, Waters urges the Bureau to alert servicers of the consequences should they, among other things, fail to notify homeowners about their post-forbearance options, unnecessarily delay reviewing loan modification applications, engage in improper foreclosure-related activity, unlawfully discriminate against borrowers, or provide inaccurate, adverse information to credit reporting agencies.

    Federal Issues House Financial Services Committee Covid-19 Mortgages Mortgage Servicing Consumer Finance Foreclosure CFPB HUD Department of Agriculture Department of Veterans Affairs FHFA

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  • VA updates loan repayment relief for Covid-19 borrowers

    Federal Issues

    On June 3, the Department of Veterans Affairs (VA) issued changes updating Circular 26-21-07 to address loan repayment relief for borrowers affected by Covid-19. The circular provides servicers with information regarding home retention options and foreclosure alternatives to use to assist borrowers affected by the pandemic. The guidance stems from the extended duration of the pandemic and developments in the VA’s program. According to the changes, “servicers should not require a borrower to make a lump sum payment to bring the loan current.” Additionally, the VA will allow “for Disaster Extend Modifications to extend the loan’s original maturity date for up to 18 months, in cases where the loan is modified not later than the date that is 18 months after the date on which the COVID-19 national emergency ends.” The circular is effective until April 1, 2022.

    Federal Issues Department of Veterans Affairs Covid-19 Mortgages Forbearance Consumer Finance

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  • VA establishes VAPCP requirements

    Federal Issues

    On May 28, the Department of Veterans Affairs (VA) published a final rule in the Federal Register, which establishes the “COVID–19 Veterans Assistance Partial Claim Payment” (VAPCP) program to help veterans resume making normal loan payments on VA-guaranteed loans after exiting forbearance due to the Covid-19 pandemic. The final rule incorporates several revisions in response to comments submitted by veterans, lenders, servicers, consumer groups, and trade associations on the VA’s proposed rule published last December (covered by InfoBytes here). Under the final rule, the partial claim maximum limit is increased from the proposed 15 percent to 30 percent of the unpaid principal balance of the guaranteed loan as of the date the veteran entered into a Covid-19 forbearance. The timeframe for servicers to submit partial claim payment requests to the VA also was increased from 90 to 120 days. Additionally, the final rule will allow servicers to use the Covid-VAPCP program “even if other home retention options are feasible, provided the partial claim payment option is in the veteran’s financial interest.” For a loan to qualify for a Covid-VAPCP, among other things, (i) the guaranteed loan must have been either current or less than 30 days past due on March 1, 2020, or made on or after March 1, 2020; (ii) the veteran must have received a Covid-19 forbearance and missed at least one scheduled monthly payment; (iii) at least one unpaid scheduled monthly payment must remain that the veteran did not make while under a Covid-19 forbearance; (iv) the veteran must indicate the ability to “resume making scheduled monthly payments, on time and in full, and that the veteran occupies, as the veteran’s residence, the property securing the guaranteed loan for which the partial claim is requested”; and (v) the veteran must timely execute all necessary loan documents in order to establish an obligation to repay the partial claim payment.

    Notably, the final rule strikes the following requirements that were included in the proposed rule: (i) veterans will not be required to repay the partial claim within 120 months; (ii) interest will not be charged on the Covid-VAPCP; and (iii) servicers will not have to complete financial evaluations of veterans in the program.

    The rule is effective July 27.

    Federal Issues Department of Veterans Affairs Mortgages Covid-19 Agency Rule-Making & Guidance CARES Act Loss Mitigation Forbearance

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  • Biden extends foreclosure protections

    Federal Issues

    On February 16, the Biden administration announced an extension of the Covid-19 forbearance and foreclosure protections for homeowners through June 30. According to the White House statement, the administration has directed HUD, Department of Veterans Affairs, and Department of Agriculture to (i) extend the foreclosure moratorium for homeowners through June 30; (ii) extend the mortgage payment forbearance enrollment window until June 30; and (iii) provide up to six months of additional mortgage payment forbearance, in three-month increments. The announcement notes that the extension will “directly benefit the 2.7 million homeowners currently in COVID forbearance and extend the availability of forbearance options for nearly 11 million government-backed mortgages nationwide.” The FHA extensions are reflected in Mortgagee Letter 2021-05 and the VA extensions are reflected in Circulars 26-21-04 and 26-21-05.

    As previously covered by InfoBytes, FHFA announced an extension of Fannie Mae and Freddie Mac’s foreclosure moratorium until March 31 and the option for borrowers to receive an additional three-month Covid-19 forbearance extension.

    Federal Issues Covid-19 HUD Foreclosure Forbearance Department of Veterans Affairs USDA Mortgages

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  • VA extends Covid-19 foreclosure and eviction moratorium

    Federal Issues

    On January 29, the Department of Veterans Affairs issued Circular 26-21-2, which further extends foreclosure and eviction relief for borrowers affected by Covid-19 (previously covered here). Specifically, all properties secured by VA-guaranteed loans, including those previously secured by VA-guaranteed loans but currently in the VA’s REO (real estate owned) portfolio, are subject to a moratorium on foreclosure and eviction through March 31, 2021. With the exception of abandoned or vacant property, the moratorium applies to the initiation of foreclosures, the completion of foreclosures in process, and evictions.

    Federal Issues Covid-19 Department of Veterans Affairs Military Lending Foreclosure Mortgages Evictions

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