A Recap of COVID-19 Related Foreclosure Moratoriums

Millions of Americans have been experiencing a variety of hardships, financial and otherwise, since the beginning of the COVID-19 pandemic. To help alleviate the financial hardship of job loss and/or wage reduction, federal and state governments, starting in March of 2020, enacted legislation to give certain home retention protections to borrowers of residential properties.

This article will touch on the laws enacted by the federal government, the Commonwealth of Massachusetts, and the regulations issued by entities such as Federal National Mortgage Association (FNMA) and Federal Home Loan Mortgage Corporation (FHLMC).

On March 27, 2020, President Trump signed H.R. 748, Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), into law. Section 4022 of the CARES Act provided that, “a servicer of a federally backed mortgage may not initiate a foreclosure for 60 days beginning on March 18, 2020, unless the property is abandoned or vacant. Such a servicer is further prohibited from executing a foreclosure-related eviction or sale during this period.” The CARES Act gave borrowers with federally backed mortgages a 60-day moratorium on foreclosures activity unless the property was vacant or abandoned. The CARES Act expired on May 18, 2020.

Since the expiration of the CARES Act, federal entities that insure, guarantee or back mortgages have issued communications (bulletins) regarding their own agency enacted moratoriums. These federal entities include, the U.S. Department of Housing and Urban Development (HUD), FNMA, FHLMC, the Department of Veterans Affairs (VA) and the U.S. Department of Agriculture (USDA). FNMA, FHLMC, HUD, VA and USDA all had foreclosure moratoriums in place through July 31, 2021 (please note that the USDA’s moratorium started on March 17, 2020). All of these moratorium bulletins contain the vacant or abandoned property exception.

Additionally, the Bureau of Consumer Financial Protection (CFPB) issued the Protections for Borrowers Affected by the COVID-19 Emergency Under the Real Estate Settlement Procedures Act, Regulation X. The Regulation prohibits servicers from initiating a foreclosure, absent a safeguard or exemption being applicable, on a federally related mortgage loan, as defined in 12 CFR 1024.2 . This CFPB action was effective August 31, 2021 through December 31, 2021. By way of example, a safeguard is the property being abandoned and an exception is that the borrower was more than 120 days delinquent prior to March 1, 2020.

In Massachusetts, Governor Baker signed into law Chapter 65 of the Acts of 2020 (Act) on April 20, 2020, and The Act became effective immediately. Section 5(a) of the Act created a foreclosure moratorium on a residential property as defined under M.G.L. c. 244, s. 35B unless the property is vacant or abandoned. Specifically, section 5A of the Act states in part that:

…mortgagee or person having estate in the land mortgaged, a person authorized by a power of sale pursuant to section 14 of said chapter 244 or right of entry or the attorney duly authorized by a writing under seal or the legal guardian or conservator of such mortgagee or person acting in the name of such mortgagee or person shall not, for the purposes of foreclosure of a residential property as defined in section 35B of said chapter 244 that is not vacant or abandoned: (i) cause notice of a foreclosure sale to be published pursuant to said section 14 of said chapter 244; (ii) exercise a power of sale; (iii) exercise a right of entry; (iv) initiate a judicial or non-judicial foreclosure process; or (v) file a complaint to determine the military status of a mortgagor under the federal Servicemembers Civil Relief Act, 50 USC sections 3901 to 4043, inclusive.

The Act was extended once from July 21, 2020 to October 17, 2020. The Act was not further extended and as such the Act has expired.

Here we are over two years from the protections noted above first being enacted. Where does that leave us when reviewing a title with a recent foreclosure in it? First and foremost, you must recognize your title has a recent foreclosure in it. Then, decide whether the various moratoriums affect the mortgage in question. If the mortgage is not given by a natural person, it is not likely a residential mortgage. If the mortgage is a part of a securitized trust series, then it is probably not federally backed or federally related. As always, please reach out to you underwriter who will review with you. Once you determine that a moratorium likely applies, you need to assess what, if any, actions were taken during the period when the applicable moratorium was in place.

The relevant timeframes for the various moratoriums are as follows:

• March 18, 2020 through May 18, 2020 – CARES ACT (Federal)

• April 20, 2020 through October 17, 2020 – Chapter 65 of the Acts of 2020 (State)

• March 18, 2020 through July 31, 2021 – FNMA, FHLMC, HUD, VA and USDA (Please note that the USDA moratorium stated on March 17, 2020)

• August 31, 2021 through December 31, 2021 – CFPB Act, Regulation X

If one or more moratoriums were in place when foreclosure activity took place on a property affected by a moratorium, from sending the notices of default under the mortgage or M.G.L. c. 244, 35A through conducting the sale, the mortgagee must provide evidence of the vacant or abandoned exemption. Mortgage holders or their servicers have been providing vacancy affidavits declaring the property to be vacant without any supporting facts. As such one needs to go behind these affidavits to properly support the foreclosing mortgagee’s position that the exemption to the moratorium(s) applies to the subject property.

The following is a list, though not exclusive, of documents that have been provided to support the foreclosing mortgagee’s ability to proceed with the foreclosure due to the property falling under the vacant and abandoned exemption:

• Work orders securing the property

• Interior inspection reports noting property is secured

• Communications from the borrower

• Court cases like receiverships confirming property is vacant

Another thing to keep in mind is that Governor Baker declared a state of emergency effective on March 10, 2020 through May 20, 2021 and issued orders during the pendency of the state of emergency, some of which impacted the ability to conduct a public action. Specifically, orders were issued limiting the number of people who could gather in certain places and other requirements like social distancing and wearing face mask. To find Governor Baker’s COVID Orders on gathering limitation, visit the Massachusetts COVID-19 State of Emergency website.

Thus, even if the mortgage holder was able to conduct a foreclosure without violating the various moratoriums, the policy writing agent must review the circumstances of the foreclosure auction to make sure the sale was not chilled by the need to comply with these orders.

Finally, please keep in mind that the Massachusetts Supreme Judicial Court (the “SJC”) through their superintendence and rulemaking authority issued a variety of orders during the COVID-19 Pandemic. Particularly important when reviewing title is remembering that the SJC tolled all civil statutes of limitation from March 17, 2020 through June 30, 2020 (one hundred six (106) days). For title review of a foreclosure this is helpful in determining if a lien recorded prior to July 1, 2020 was entitled to notice or was obsolete under a relevant statute of limitation and when the Certificate of Entry of the Foreclosure Affidavit of Sale obtains the three-year statutory protection under M.G.L. c. 244, s. 1 and s. 15 respectively absent a proper challenge. When in doubt add one hundred and six days to your statute of limitations calculation and/or contact a First American underwriter. A sample calculation table:

• A statute of limitation but for the SJC tolling order would’ve expired on March 31, 2020 (14 days after March 17, 2020). Add the 14 days to July 1, 2020 and the new statute of limitation date is July 15, 2020.

• A statute of limitation but for the SJC tolling order would’ve expired on June 30, 2020 (106 days after March 17, 2020). Add 106 days to July 1, 2020 and the new statute of limitation date is October 14, 2020.

We hope this overview serves as a helpful timeline guide when reviewing a title with a foreclosure or foreclosure activity that took place between March 2020 through the end of December 2021. As always, please reach out to a First American underwriter when your title has a foreclosure in it if you have any questions, so that we can assist you in your review.

Written by Matthew Carbone, Underwriting Counsel