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Guest column by Mary Olberding, register of deeds:
Help for those who can’t pay mortgage or rent
Published: 4/29/2020 3:35:52 PM
During these unprecedented times,
federal and state legislators are working on relief packages for those
financially impacted by COVID-19, including protections for those struggling to
make their mortgage or rent payments.
At the federal level, the $2
trillion Coronavirus Aid, Relief and Economic Security Act (CARES) includes a
moratorium on foreclosures and allowing forbearance for mortgage payments of up
to one year. Massachusetts’ version approved last week puts a moratorium on
evictions and foreclosures during the crisis.
These are steps that property owners
and renters can use for direct assistance, but consumers need to know what
these bills do for them.
In Massachusetts, no evictions or
foreclosures can take place for 120 days after the bill was enacted on April
20, or 45 days after the state of emergency has been lifted, whichever is
soonest. And, if necessary, the governor can extend the expiration date.
Renters, either small businesses or
residential tenants, cannot be evicted for nonpayment of rent except in cases
of criminal activity or for health and safety reasons. Nor can tenants be
charged late fees. The law does not forgive payments or prevent landlords from
later recovering monies owed. Rather, tenants must notify landlords in writing
of their COVID-related circumstance no later than 30 days after a missed
payment. Landlords may access deposit payment of tenants’ last month’s rent to
meet their property-related expenses.
For homeowners, it is important to
note that the federal CARES Act only covers mortgages that are federally
guaranteed like Freddie Mac and Fannie Mae, while the law in Massachusetts
applies to all mortgages. The federal CARES Act moratorium began on March 18th
and extends for 60 days. Notably, the federal moratorium includes a halt to
foreclosures initiated prior to the act, where state law is more ambiguous on
this point.
In all of these cases, creditors are
prohibited from reporting delinquencies to credit agencies and the request to
miss any payment obligations rests with the debtor. Both laws allow for a
period of forbearance for residential property up to 180 days. Forbearance is a
suspension of payments, not forgiveness of debt.
There are some critical distinctions
between these laws:
CARES allows borrowers to request a
second forbearance of up to 180 days, where the Massachusetts law stops with
only one 180-day forbearance period.
■CARES does not prohibit balloon
payments, meaning someone may owe all of their missed payments at one time.
■Massachusetts law specifies that
additional interest or fees beyond what is initially owed in the forbearance
period are not allowed and payments subject to forbearance will be added to the
end of the term of the loan.
■Better still, Massachusetts law
provides for the opportunity to enter into alternate payment plans for those
subject to forbearance. That means homeowners can negotiate how they want to
make the missed mortgage and interest payments. For example, they can spread it
over the life of the loan, make interest-only payments or prepay loans when the
economy returns.
How difficult it is to obtain
forbearance remains an open question. Banks and other mortgage servicers appear
to have sole authority to grant the forbearance and for how long. The Consumer
Finance Protection Bureau suggests that homeowners able to pay their mortgage
should do it. Those that can only pay part should contact their lender.
Much of the financial fallout from
COVID-19 is unknown. We can use the housing crisis of 2007-2012 as a guide to
prevent some unnecessary turmoil. During that time, banks did not have proper
documentation before initiating foreclosures and they were therefore unlawful.
Many safeguards have been since put in place, but none of the current
legislation requires documentation for forbearance of mortgage payments by
either borrower or lender. That opens both parties up for disputes of the
agreed upon terms and conditions and possible default action later by the
mortgagee.
I strongly encourage anyone seeking
forbearance to put all requests in writing — and get it from a lender too. I am
also advocating for legislation at the state and federal level for more
reporting and accountability by mortgagees.
One remedy would be a notice of
default sent to the borrower, much like that required now by the Servicemembers
Civil Relief Act, to give people an opportunity to prove their COVID-19 hardship.
They would have a prescribed number of days to respond to the notice and could
make an appearance in court to demonstrate the forbearance to avoid
foreclosure. The lender would bear the burden of recording that order at the
Registry of Deeds and providing public notice. Not only would this prevent
unnecessary and unlawful foreclosures, it would give clear chain of title for
the property for future sale, either by mortgagor or mortgagee.
Already, the Registries are seeing
an uptick in foreclosure-related activity. The moratorium prevents mortgage
banks and servicers from taking any action on foreclosures, but with no penalty
or enforcement provisions in the legislation, outside of legal action, there is
no remedy for homeowners that the moratorium is designed to help.
I have contacted Congressman Jim
McGovern’s office, our state legislators and the Consumer Protection Division
of the Massachusetts Attorney General’s office to work on increased
protections.
In the Great Recession, we learned
how devastating it can be to property owners and to the economy if banks are
not accountable for complying with protections. There is potential for the
pandemic to cause long-term financial hardship. Unlike the foreclosure crisis
of 2008, which largely effected homeowners, the current crisis also impacts
renters, landlords and small businesses — anyone with a mortgage.
Here are some resources:
■The CARES Act can be found at
financialservices.house.gov
Information about obtaining a
forbearance and CARES can be found at consumerfinance.gov
Mortgage information may be found at
MassLandRecords.com
Please note: While this is a summary
of new legislation, it should only be used as guidance and not as financial or
legal advice. Contact a professional financial advisor, attorney, or other
expert for individual advice.
Mary
Olberding is the Hampshire Register of Deeds.
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