Press Releases
04/23/2020
Attorney General Tong Recommends Help for Homeowners Affected by COVID-19
(Hartford, CT) – In the wake of the COVID-19 pandemic, Attorney General William Tong and a bipartisan coalition of 32 attorneys general recommended actions to help borrowers with mortgage loans in letters sent to the Federal Housing Finance Administration (FHFA) and the Department of Housing and Urban Development (HUD).
The coalition applauded federal efforts to suspend evictions and foreclosures, and expressed appreciation for additional forbearance and foreclosure relief provided by the CARES Act. The coronavirus-relief legislation, which was signed by President Trump on March 27 provides protections for homeowners whose loans are backed by Fannie Mae and Freddie Mac or other federal entities.
"We're only beginning to understand the economic ramifications of COVID-19," Attorney General Tong said. "While FHFA and HUD have taken some proactive measures to protect American homeowners, the suggestions made by this bipartisan group of attorneys general would help millions avoid delinquency and limit the potentially disastrous strain on the mortgage servicing industry. We ask all financial institutions and servicers to work with borrowers who cannot meet their obligations because of the pandemic."
As part of the CARES Act, FHFA and HUD have already adopted streamlined processes for borrowers who have been affected by COVID-19 to enter into forbearance plans, which allow borrowers to pause mortgage payments for a limited period of time. Currently, once the forbearance period ends, borrowers are being asked to either repay the missed payments in a lump sum or enter into a more permanent loss mitigation solution.
Because an unprecedented number of borrowers will need help at essentially the same time, the letters recommend moving the forborne (or missed) payments to the back of the loan term. That would allow immediate relief for homeowners and reduce borrower confusion while simultaneously limiting the strain on the mortgage servicing industry.
The letters make three recommendations:
1. FHFA and HUD should issue guidance revising their forbearance programs so that forborne payments are automatically placed at the end of the loan’s term;
2. FHFA and HUD should expand eligibility for disaster relief loss mitigation programs; and
3. FHFA and HUD should clarify that the moratorium on foreclosures and evictions applies to all aspects of the foreclosure or eviction process. That includes issuing pre-foreclosure and acceleration notices, posting or publishing any notices, filing or proceeding with motions beyond continuances, or taking any other foreclosure or eviction action during the moratorium.
The protection of the CARES Act applies only to federally backed mortgages, which make up approximately 62 percent of the mortgage market. Borrowers who are not covered should still contact their lender or mortgage servicer (the company to which they send their monthly payment) to determine whether it is offering any relief during the pandemic – as many Connecticut financial institutions are doing.
Are you eligible for relief?
If you have a federally backed mortgage, under the CARES Act you have the right to request a forbearance for up to 180 days if you have a financial hardship due to the coronavirus pandemic. You also have the right to request one extension for up to another 180 days.
The Consumer Financial Protection Bureau offers a guide to coronavirus mortgage relief options on its website. To determine whether you are eligible for a forbearance plan or other assistance:
· First find out who services your mortgage and whether you have a federally backed mortgage. See tips from CFPB or go to FannieMae or Freddie Mac’s look up tool.
· You may also call your loan servicer to determine whether you are eligible for relief under the CARES Act or whether other relief is available.
The Connecticut Department of Banking offers information on its website regarding the over 50 credit unions and banks in Connecticut that have agreed to offer mortgage relief to borrowers facing economic hardship, but who are not be eligible for relief under the CARES Act. Eligible borrowers, those whose loans are owned by a participating bank or credit union, may receive mortgage-payment forbearances and relief from mortgage related fees and charges.
When considering whether to seek a forbearance, borrowers should keep in mind that forbearance doesn’t erase what you owe. You still must repay any missed or reduced payments in the future.
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Media Contact:
Elizabeth Benton
elizabeth.benton@ct.gov
Consumer Inquiries:
860-808-5318
attorney.general@ct.gov