SLG Client Alert: Updates: Federal and CA State Foreclosure Moratoriums:

Note: The following is a general discussion on the specified topic or issue and may not be relied on as legal advice in any specific case or matter you encounter. You should review any applicable case, or matter with counsel experienced in this area of law and should not generally rely on the discussion in this Alert.
Date: March 27, 2020
To: All Scheer Law Group Clients and Affiliates
From: Spencer Scheer
Subject: Updates: Federal and CA State Foreclosure Moratoriums:
State and Federal orders, regulations and guidelines are being issued daily re foreclosure and eviction moratoriums and voluntary forbearance. It causes confusion as lenders, servicers and investors struggle to determine what is voluntary and what is mandatory. SLG previously updated on the CA eviction Moratorium ( The https://www.scheerlawgroup.com/slg-client-alert-ca-executive-order-n-28-20-eviction-and-foreclosure-moratorium/).

The following is an update on CA and federal foreclosure moratoriums and will provide an update and some thoughts on who is covered.

1. New Federal Moratorium on Consumer Foreclosures and Right to Request Forbearance

On Wednesday March 25, the U.S. Senate passed the Coronavirus Aid, Relief, and Economic Security (“CARES”). President Trump is expected to promptly sign the bill into law. Assuming the bill is signed there will be a limited duration federal moratorium on foreclosures and evictions on non-exempted federally backed mortgages, per the following:

Section 4022(c)(2) of the CARES Act (“Foreclosure Moratorium and Consumer Right to Request Forbearance”) provides “Except with respect to a vacant or abandoned property, a servicer of a Federally backed mortgage loan may not initiate any judicial or non-judicial foreclosure process, move for a foreclosure judgment or order of sale, or execute a foreclosure-related eviction or foreclosure sale for not less than the 60-day period beginning on March 18, 2020.” Please note that the definition of “Federally backed mortgage loan” includes, but is not limited to, any loan which is secured by a first or subordinate lien on residential real property (including individual units of condominiums and cooperatives) designed principally for the occupancy of from 1- to 4- families that is “purchased or securitized by the Federal Home Loan Mortgage Corporation or the Federal National Mortgage Association.” Thus, Fannie Mae loans are covered by Section 4022(c)(2).

2. Extent of CA Foreclosure Moratorium.

Questions have arisen on whether the foreclosure moratorium and related mortgage relief in CA, announced by Gov Newsom on March 25, 2020 (“Announcement”) https://www.gov.ca.gov/2020/03/25/governor-gavin-newsom-announces-major-financial-relief-package-90-day-mortgage-payment-relief-during-covid-19-crisis/ , is voluntary or mandatory.

Based on the following, SLG believes that as of this date, it is voluntary and limited to the financial institutions that have agreed to provide such relief, subject to regulatory agencies, further orders or further regulations making the provisions mandatory. Every lender, investor and servicer should review their applicable regulatory agency for guidance and mandates.

1. It is voluntary based on the following language in the Announcement and review of applicable regulatory websites;

“ I thank each of the financial institutions that will provide this relief to millions of Californians who have been hurt financially from COVID-19.”

2. A voluntary agreement is now in Place by Specified Financial Institutions. It is Assumed that such Entities Regulators will Develop Further Guidelines or Mandates, based on the following language in the Announcement:

“Citigroup, JP Morgan Chase, US Bank, Wells Fargo, and nearly 200 state-chartered banks, credit unions, and servicers have committed to providing relief for consumers and homeowners in California.”

3. The Moratorium applies to consumer and commercial Loans but subject to the regulations issued by each regulatory Agency, based on the following langue in the Announcement and review of Applicable Regulatory Websites:

“Financial institutions will offer, consistent with applicable guidelines, mortgage payment forbearances of up to 90 days to borrowers economically impacted by COVID-19.{NOTE, no distinction between consumer and commercial borrowers, in the Announcement} In addition, those institutions will:

• Provide borrowers a streamlined process to request a forbearance for COVID-19-related reasons, supported with available documentation;
• Confirm approval of and terms of forbearance program; and
• Provide borrowers the opportunity to request additional relief, as practicable, upon continued showing of hardship due to COVID-19.”

The term “applicable guidelines” is the operable term for all of the suggested relief to be provided.

4. Guidance Issued to Date:

Ø The CA Department of Business Oversight (“DBO”) regulates state chartered banks and credit unions. The DBO has an announcement that mirrors the Newsom Announcement, and advises consumers to contact the cooperating financial institutions. The following FAQ response further highlights that the relief is not applicable to all financial institutions, but to those who voluntarily agree:

“What if my financial institution isn’t offering this relief?

At this time, JP Morgan Chase, US Bank, Wells Fargo and Citigroup, and nearly 200 state-chartered banks, credit unions are supporting these commitments. The state will welcome any other institution that would like to meet the moment and provide much-needed financial relief to Californians.”

Ø The DRE website has nothing to date. The FAQ document on the website re COVID 19 issues, says “Business Practices Coming soon.”

Ø NCUA (Fed Credit Unions). In a FAQ provided that:

5. Will credit unions be given guidance on working with borrowers affected by the COVID-19 pandemic?

Yes, the federal financial institution regulatory agencies and the state banking regulators issued an interagency statement encouraging financial institutions, including credit unions to work constructively with borrowers affected by COVID-19 and providing additional information regarding loan modifications and troubled debt restructurings. The interagency statement promotes voluntary cooperation with borrowers, and can be found at: https://www.ncua.gov/newsroom/press-release/2020/agencies-provide-additional-information-encourage-financial-institutions-work-borrowers-affected

More will be known, as implementing regulations, court cases and further emergency orders are issued. You must update your information daily.

Please call or email if you have questions about this case.

Spencer Scheer