In 2022, we will see a record Foreclosure / Short Sale Wave as many folks are behind on their mortgages, and as the Forbearance Agreements come to an end.
Now is the time to start working on building the Short Sale Pipeline so that we can get you a lot of great deals!
For More Information, Keep Reading….
Understanding Recent Changes in the Foreclosure Process
There have been a lot of changes recently in the way foreclosures are and will be processed and when they will begin again. ABBA Loss Mitigation is issuing this necessary update so you can plan as much as possible for coming events. According to the latest findings from Black Knight.,_ as of June 22, 2021, there are 2.06 million, or 3.9% of all mortgage holders that remain in COVID-19 related forbearance plans. Even during the worst of the Great Recession, this many borrowers were not seen this far behind. More than 3% of all borrowers are now four months or more behind on their mortgages, marking the point at which a foreclosure may be initiated. Once the federal foreclosure moratoria lift, these homeowners are at risk of having foreclosure started as soon as they exit forbearance, with at least 900,000 homeowners projected to exit forbearance between now and the end of 2021.
First the FHFA (the organization created during the Great Recession to oversee Fannie Mae and Freddie Mac, owners of half of all the loans in the United States) issued a statement on June 24, 2021, stating Fannie Mae and Freddie Mac will continue their foreclosure and eviction moratorium until July 31, 2021.
This Is The Statement
The CFPB (an organization created during the Great Recession to oversee all lenders) issued Regulation X on June 25, 2021. Regulation X created Mortgage Servicing rules on how and when forecloses can take place. Regulation X goes into effect August 31, 2021, and prohibits all Mortgage Servicers, not just Fannie Mae & Freddie Mac loans, that have 5,000 or more loans they service, from making a first notice or filing for foreclosure before December 31, 2021.
This is Regulation X
These are the rules they need to follow:
- Give borrowers a meaningful opportunity to pursue loss mitigation options as borrowers exit forbearance. This often means their allowable forbearance timeline has run out. This is currently up to interpretation.
- Allow mortgage servicers to help borrowers in a more simplified manner. Under the new temporary rule, servicers can offer streamlined loan modifications to borrowers with COVID-19-related hardships without making borrowers submit all the paperwork for every possible option. These streamlined loan modifications cannot increase borrowers’ payments and have protections built into them.
- Explain to borrowers their options. Servicers will be required to increase their outreach to borrowers before initiating foreclosure. They must tell borrowers key information about their repayment and other available options as they are exiting forbearance or struggling to make mortgage payments.
Mortgage Servicers can begin the foreclose process as of January 1, 2022. But, regarding defaulted loans that meet the below criteria, Mortgage Servicers can begin the foreclose process as of August 31, 2021:
- The borrower(s) abandoned the property. The word vacant was removed, the definition of abandoned is up to interpretation right now. The intent is to avoid having excessive vacant/zombie homes waiting to be foreclosed.
- The borrower(s) were more than 120 days behind on their mortgage before March 1, 2020. This is important and sets a beginning date for the COVID-19 housing crisis.
- The borrower(s) are more than 120 days behind on their mortgage payments and have not responded to specific required outreach from the mortgage servicer for 90 days. Approximately one third of all
borrowers that aren’t current are not replying to their Mortgage Servicer.
- The borrower(s) have been evaluated for and do not qualify for all
the options other than foreclosure. This is up to interpretation right now.
Lastly, if you compare the dates, you will notice that the FHFA foreclosure and eviction moratorium ends July 31, 2021. The CFPB’s Regulation X starts a month later, August 31, 2021, leaving a month gap in the middle. The FHFA issued statement on June 29, 2021, stating that Fannie Mae and Freddie Mac will follow the rules and timelines of the CFPB’s Regulation X for foreclosures. This means that FHFA eviction moratorium still sends on July 31, 2021.
ABBA Loss Mitigation can help with all your client(s) needs. If you come across any seller(s) who have been in a forbearance situation, or are behind on their mortgage payments, do not hesitate to call, we are here to help.