Avoiding Foreclosure in the Time of COVID-19 and Beyond

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• The Foreclosure Process Can Only Begin After 120 Days of Missed Payments
• Carefully Evaluate Financial Options To Avoid Scams
• Find an Experienced Attorney

Millions of Americans became unemployed during coronavirus-forced business shutdowns. The financial strains of COVID-19-related unemployment gave rise to an additional worry: missing mortgage payments and the risk of foreclosure.

As Americans moved past most or all of the pandemic period restrictions in 2020-2021 and their effects, some insights for managing the risk of foreclosure remain sound, regardless of the underlying economic pressures.

The Foreclosure Process Can Only Begin After 120 Days of Missed Payments

During the COVID-19 emergency, the federal government placed a moratorium on foreclosures for homes with Fannie Mae, Freddie Mac, or FHA-insured mortgages. That included foreclosures already in process. Other mortgage lenders offered assistance, such as loan modification. But when the forbearance period expired, homeowners were left with the renewed prospect of foreclosure proceedings.

However, federal law sets a general requirement about when foreclosure proceedings can begin—only after 120 days. “There are things people should know today to prepare for the risks of foreclosure,” says Troy Doucet with Doucet Gerling Co. in Dublin, Ohio. “First, federal law (RESPA) requires that a home loan be at least four months behind [on monthly mortgage payments] before foreclosure is filed in court.  If a loan servicer files before this four-month period passes, it can be liable for damages and have the case dismissed before refiling.”

What is the purpose of the four-month period? “RESPA exists to try and give the homeowner and mortgage servicer an opportunity to find a resolution short of foreclosure… Thus, if someone starts to get behind, they can apply for relief from their mortgage company to see if a deal can be worked out.”

Carefully Evaluate Financial Options To Avoid Scams

With any type of loan forgiveness, Timothy J. Cook, with Kohl & Cook Law Firm in Columbus, Ohio, urges people to look closely at what’s offered. “One of my biggest concerns related to the COVID-19 pandemic [was] miscommunication and misinformation to consumers as it relates to financial assistance with monthly bills such as mortgages, car loans, and utilities,” he says.

“If a consumer decides to take advantage of assistance or forbearance on monthly payment obligations, they should make sure to understand what happens to the obligation while payments are in forbearance or on pause. The last thing consumers want is to end up in default or foreclosure because of a miscommunication or misunderstanding as to what the ramifications are for missing a payment or electing temporary forbearance during this crisis,” Cook explains.

Find an Experienced Attorney

“Consumers should talk to an attorney if they are unsure of what assistance is being offered to them,” Cook continues. “If the financial assistance offered sounds too good to be true, it probably is.”

For additional information on legal issues related to foreclosure, see our overviews of consumer law and bankruptcy law.