NCUA FAQs on End of Forbearance and Foreclosure/Eviction Moratorium
As part of its “Navigating and Understanding the End of Pandemic-Era Homeowner Protection Programs” (21-CU-09, blogged about here), the NCUA published a set of FAQs regarding the end of COVID-19 forbearance programs and foreclosure and eviction moratoriums. The 3-questions are targeted toward credit union members, but credit unions could benefit from knowing the information provided.
The first question discusses available options for members whose forbearance period is ending, and want to stay in their home. NCUA lays out four post-forbearance options (from the CFPB), the circumstances under which each option might be right for a particular member, and how each option works:
1. Repayment Plan – good for members who can afford to pay more than their regular mortgage payment for a few months, since a portion of the amount owed gets added to each monthly payment, until the loan is caught up.
2. Deferral or Partial Claim – good for members who can resume regular monthly payments, but cannot afford to increase them. A deferral will move the missed payments to the end of the loan, while a partial claim will put the missed payments into a subordinate lien repayable only when the member decides to refinance, sell, or terminate the mortgage.
3. Modification – good for members who can no longer afford to make their regular mortgage payment. This option may allow the payment to be reduced to an affordable amount, with the missed payments being added to the loan balance; the trade-off with a modification is generally a longer repayment term.
4. Reinstatement (Lump Sum) – good for members who want to pay back all missed payments at one time. This option is available to members who have the means to pay all missed payments at once; however, credit union servicers cannot require payment via a lump sum, so be sure to provide all available options to members who inquire.
Credit unions should also be aware that repayment options vary by agency or GSE for federally backed mortgages, so a review of those guidelines could help to ensure all appropriate options are provided and explained to members.
The second question addresses whether homes can be foreclosed on if a member does not qualify for any payment options and cannot make their mortgage payments. The NCUA references the American Rescue Plan, which provides “almost $10 billion to help struggling homeowners with financial assistance to help keep them in their homes.” The money may be used in a variety of ways, including mortgage payments, utilities, insurance, etc. Members can find out if they qualify for assistance at Treasury’s website. NCUA also references general foreclosure rules, which state that a member must be more than 120 days past due before beginning the foreclosure process. However, the CFPB recently issued a COVID-19 Mortgage Servicing Final Rule that provides for various foreclosure safeguards. The safeguards do not block credit union servicers from starting foreclosure completely, but it does “require servicers to have a higher level of diligence and outreach to ensure every effort was made to work with the borrower before moving on to foreclosure.” The final point in this question addresses the now-expired (as of September 30, 2021) eviction moratorium, which was in place to help keep homeowners in their homes, even after foreclosure.
The last question discusses eviction protections for renters. While not directly applicable to credit unions, it may be helpful to provide information to members regarding available rental assistance. Treasury has a website dedicated to Emergency Rental Assistance (ERA) programs, broken down by state, with links to each.
Knowledge is power, and knowing all of the options is a powerful way to proactively help members through tough times.
About the Author
Rebecca Tetreau joined NAFCU as regulatory compliance counsel in February 2021. In this role, Rebecca helps credit unions with a variety of federal regulatory compliance issues.