The federal foreclosure moratorium has ended. Here’s what to do to save your home

The federal foreclosure moratorium came to an end on July 31. In anticipation of this, the Consumer Financial Protection Bureau established some temporary safeguards to give borrowers time to explore their options — but those don’t take effect until August 31. What happens to borrowers in the 30 days between?

Rachel Labush, staff attorney for Community Legal Services (CLS), said the organization is hopeful that mortgage servicers will not rush to foreclose on Philadelphia homeowners before the new CFPB protections go into effect.

The moratorium on foreclosures that expired at the end of July only applied to the roughly two-thirds of borrowers with government-backed mortgages: FHA, VA, Fannie Mae and Freddie Mac loans.

Rachel Labush. (Courtesy)

“At least one third of borrowers in Philadelphia have non-government backed loans, a category that includes most home equity loans and many subprime loans from before the 2008 housing crash,” Labush said. “No moratorium has been effect for those borrowers, yet fewer than 200 total foreclosures were initiated against owner-occupied properties in Philadelphia in the first seven months of 2021.”

For contrast, over 1,600 foreclosures were initiated against owner-occupied properties in the seven months before the COVID-19 pandemic hit.

In addition, the Federal Housing Finance Agency (FHFA) has announced that servicers of Fannie and Freddie loans must treat the foreclosure protections of the new CFPB rule as if they were already in effect this month.

Still, Labush said CLS is concerned about the many homeowners with financial hardships caused or worsened by the COVID pandemic who are behind on their mortgages. She said it is important for them to be in contact with their mortgage servicer and to request a forbearance or other workout.

Under already-existing CFPB rules, servicers can’t initiate foreclosures against homeowners who are in an active forbearance or who have applied and are under consideration for a loan modification.

It is not too late for delinquent homeowners with government-backed mortgages to get into forbearance, which will protect them from the initiation of foreclosure, Labush said. Many servicers of non-government backed mortgages are still offering forbearances as well.

For those coming to the end of a forbearance or otherwise ready to resume making payments, Labush said it is important to be in touch with your mortgage servicer and request review for a post-forbearance workout.

Anyone who needs help working with their mortgage servicer can contact the Save Your Home Philly Hotline at 215-334-4663.

Depending on the type of loan and length of the delinquency, this could consist of a deferral of missed payments to the back of the loan, loan modification, or some combination of the two. Labush said the goal of the new CFPB rule is to make sure that borrowers have an opportunity to be reviewed for a workout before foreclosure, and to have a smooth transition from forbearance to making payments again wherever possible.

Anyone who needs help working with their mortgage servicer can contact the Save Your Home Philly Hotline at 215-334-4663. The Hotline will connect callers with a free housing counselor from one of a network of agencies across the city, and in some cases can provide legal advice and referrals.

“Working with a housing counselor can help borrowers communicate with their mortgage servicer, understand their options and choose what is best for them. Housing counselors can also help a borrower with a small delinquency apply for a home retention grant, or submit an application to the state’s Homeowner’s Emergency Mortgage Assistance Program on behalf of a borrower who has received an ‘Act 91’ pre-foreclosure notice,” said Labush.

Many people have been asking about federal relief money for homeowners.

Pennsylvania is set to receive $350 million in federal funding from the Homeowner Assistance Fund (HAF), included in the American Recovery Plan to assist homeowners affected by COVID-19. However, Labush said Pennsylvania has not yet submitted its final plan to the federal government and the money may not be available to delinquent mortgage borrowers here for several more months.

According to CLS managing attorney Michael Froehlich, help is on the way.

“Pennsylvania’s $350 million Homeowners Assistance Fund should help thousands of homeowners get back on their feet and save their homes. But until the HAF begins taking applications, homeowners who are struggling to pay their mortgage should reach out to their mortgage company to apply for a forbearance,” he advised.

For those Philadelphia homeowners who are already in foreclosure or who end up in foreclosure in the coming months, it is crucial to read all court filings and notices and call the Save Your Home Philly hotline.

Owner-occupants facing foreclosure in Philadelphia are entitled to participate in the court’s Mortgage Foreclosure Diversion Program, which gives them an opportunity to work with a housing counselor and the lender’s attorney to try to reach a workout before a foreclosure judgment can be entered.

“Calling the hotline is the first step to participation in the program, and in most cases to reaching a resolution of the foreclosure where the borrower keeps their home,” Labush said.