Servicers and regulators unite for troubled borrowers
The Legal League 100 Special Initiatives Working Group recently hosted the webinar “Application of the American Rescue Plan Act and the end of forbearance plans, “discussing the application of American Rescue Plan Act distressed homeowners, limiting relevant loss mitigation measures in the CFPB and detailing the current FHA, VA and USDA forbearance plans.
Moderated by Marissa Yaker, Chief Foreclosure Lawyer for Padgett Law Group, attendees included Ryan Bourgeois, General Counsel and Partner, BDF Law Group; Michelle Garcia Gilbert, Managing Partner, Groupe Gilbert Garcia; Seth Greenhill, Bankruptcy Lawyer, Padgett Law Group; Stephen Hladik, HOF Legal Group; and J. Anthony Van Ness, Van Ness law firm.
Hladik started the event by discussing section 3204 of the American Rescue Plan Act (ARP), where Congress allocated $ 100 million to the Neighborhood Reinvestment Corporation to use for housing advice for consumers behind on their mortgages.
Servers have been inundated since the start of the pandemic with inquiries from U.S. homeowners seeking solutions to stay up to date on their housing payments. ARP provides such answers to consumers looking to stay on top of their mortgages or looking for forbearance options.
âSection 3204 of the ARP is strictly for the board,â Hladik said. “He does not allocate funds for direct relief.”
Gilbert continued the discussion by presenting the main aspects of Section 3205 of the ARP, the homeless assistance and support services program, which allocates $ 5 billion to the HUD secretary for individuals or families. qualified for assistance within the framework of the Cranston-Gonzalez National Affordable Housing Act.
Cranston-Gonzalez created the Home Investment Partnership Program (HOME), which provides grants to cities, counties and states, including Sonoma County California, the Home Consortium in Wisconsin, and the Texas Department of Housing and Community Affairs as examples. These groups provide tenant-based housing assistance, affordable housing development and support (in accordance with Cranston-Gonzalez Section 212 (a)) and other services to the homeless population.
âWe don’t know exactly how this law is going to be implementedâ¦ it’s happening on the regulatory side,â Gilbert said. “The US Congressional Budget Office estimated the budgetary effects of the law, and that added a bit to the deficit without adding a lot of corresponding revenue.”
Greenhill detailed Section 3206: ARP Homeowner Assistance Fund, which provides direct aid to Americans, via $ 9,961,000 allocated to state or local governments for “qualifying expenses,” funds intended to prevent mortgage arrears, defaults, foreclosures, loss of utilities or household energy. services, which are available to homeowners experiencing financial hardship after January 21, 2020.
The topic moved to the topic of abstentions, and Van Ness detailed abstention plans specifically related to GSE.
“What this means as a whole is that on April 24, 3.4 million homeowners or 6.4% of all mortgages entered into COVID-19 mortgage forbearance plans,” Van Ness said. . âI consulted a report from June 9, 2020 which said that 8.8% or 4.66 million were in abstention plans. It actually decreased by 1.2 million loans. To put that in perspective, we have about 1.5 million or 46% of all homeowners in COVID-19 forbearance plans are business loans. “
For homeowners coming out of forbearance, there are three basic resolution paths that can be taken when a loan is still in default after a forbearance period of 12 months or more, including loan reinstatement upon expiration or over time; modification / postponement change the structure of the loan; or other training options.
And although the panel discussed that the Consumer Financial Protection Bureau (CFPB) has “suggested” a moratorium on foreclosures until 2022, it is asking for comment, but panelists agreed that by summer 2021 , all loans or some loans require additional consideration in terms of forbearance options.
The panel then turned to Bourgeois who looked at the topic of FHA COVID loss mitigation options available to struggling homeowners. The options described included the COVID-19 stand-alone partial claim; the modification of the COVID-19 homeowner loan; the combination of the COVID-19 partial claim and the loan modification; and the COVID-19 FHA Home Affordable Modification Program (FHA-HAMP), Combined Loan Modification and Partial Claim with Reduced Documentation, which may include deferral of principal and requires income documentation.
As the Consumer Financial Protection Bureau (CFPB) proposes changes to curb impending foreclosure measures as emergency federal foreclosure protections are set to expire, the Bureau is seeking public comment in order to avoid the windfall of foreclosures that could overwhelm service agents. The panel highlighted some of these changes and their potential impact.
âI personally enjoyed reading these changes,â Yaker said. âIn a nutshell, the CFPB said that there would be such a large number of borrowers coming out of forbearance in September and October, the fear was that borrowers who had been delinquent throughout their forbearance would not have sufficient time to be reviewed. for any loss mitigation. “
When asked what the future held for managers and borrowers beyond July 1, 2021, when the moratorium was to be lifted, the panel was cautious.
âEven with the exceptions, it looks like the CFPB won’t allow foreclosures until the duty officer at least attempts a contact after the rule’s effective date,â Greenhill said. “I don’t anticipate much movement before the CFPB rules come into effect.”
Van Ness said, âI guess the CFPB will continue to ban loans from FHA, Fannie Mae and Freddie Mac,â Van Ness said. âI hope they will allow conventional loans to work in the best interests of the borrower. I hope the CFPB will meet the managers halfway to enable us to get borrowers moving where they can. “
Click here to access a recording of the Legal League 100 webinar âEnforcing the American Rescue Plan Act and Ending Forbearance Plansâ.