Federal Foreclosure Moratorium And Mortgage Payment Forbearance Extended

Families faced with financial uncertainty got some good news on Tuesday. The federal government extended the moratorium on foreclosures and mortgage payment forbearance until June. The original order, enacted by President Trump in March 2020, offers protection to homeowners with federally-backed mortgages.

The protections extend the current foreclosure moratorium for homeowners through June 30, 2021, and extends the enrollment window for mortgage payment forbearance until June 30, 2021. Homeowners who entered forbearance on or before June 30, 2020, will be granted up to six months of additional mortgage payment forbearance in three-month increments.

Details of forbearance and foreclosure moratorium

It’s key to understand that forbearance isn’t the same as forgiveness: Interest will continue to accrue on the mortgages during this period, and all costs will have to be repaid after the forbearance period ends (however, lenders are not allowed to ask for all of the skipped payments in one lump sum).

These provisions apply to homeowners with government-backed mortgages, which account for about 70% of all mortgages in the United States and include loans from Fannie Mae and Freddie Mac as well as loans insured by the Federal Housing Administration. The Biden administration states today’s extension will benefit 2.7 million homeowners enrolled in the mortgage forbearance program, and 11 million government-backed mortgages remain eligible for this assistance.

How the extension affects title companies and real estate transactions

When entering into a residential real estate transaction, it is imperative that the seller is asked early in the process if they have entered into forbearance. It is estimated that nearly 3 million mortgages nationally are currently under forbearance. With forbearance, there may not be any documents recorded of public record to indicate the property owner entered into a forbearance agreement. Without knowledge of forbearance, a closing could be hindered if the payoff comes in higher than expected because it includes the payments that were not made during the agreement period, plus interest and fees associated with the agreement.

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