Avoiding Foreclosure in the Time of COVID-19

With millions of Americans unemployed because of coronavirus-forced business shutdowns, many have an additional worry: mortgage payments.

“I fear that we are going to see a big influx of foreclosures in about six to nine months,” says Troy Doucet with Doucet Gerling Co. in Dublin, Ohio. “There are things people should know today to prepare for the risks of foreclosure. First, federal law (RESPA) requires that a home loan be at least four months behind before foreclosure is filed in court.  If a servicer files before this four-month period passes, it can be liable to damages and have the case dismissed before refiling.

“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.”

For homes with Fannie Mae, Freddie Mac or FHA-insured mortgages, there is a 60-day moratorium on foreclosures. That includes foreclosures already in process. In addition, Fannie Mae/Freddie Mac are offering payment forgiveness for up to a year for those who can’t pay due financial hardship caused by the coronavirus. Other mortgage lenders are starting to offer assistance, such as loan modification, as well.

With any type of loan forgiveness, Timothy J. Cook, with Kohl & Cook Law Firm in Columbus, urges people to look closely at what’s offered. “One of my biggest concerns related to the COVID-19 pandemic has been 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 a forbearance on monthly payment obligations, he or she 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.

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

For information on more legal questions regarding COVID-19, visit FindLaw’s legal center, or find more articles on superlawyers.com/articles (search for COVID-19). For more information on this area of law, see our overview of consumer law.