June 3, 2020
COVID-19's Impact on New York Foreclosure
We hope that you and your families are staying healthy and safe during these unique times. Considering most businesses have been temporarily closed or removed from their offices, we have seen numerous layoffs throughout the country. As a result, unemployment is at its highest levels since the Great Depression of 1929 and mortgage defaults will undoubtedly increase, potentially opening the flood gates for foreclosures.
In order to stem the tide of these new actions, the State and Federal governments have stepped in and placed moratoriums on foreclosures.
On March 20, 2020, Governor Cuomo issued Executive Order 202.8, which stated, among other things, that from March 20, 2020, "there shall be no enforcement of either an eviction of any tenant residential or commercial, or a foreclosure of any residential or commercial property for a period of 90 days." While the language was not clear if this just meant the auction, the State Courts put that question to rest on March 22, 2020 when an Administrative Order barred all non-essential filings in New York Courts until further order. As a foreclosure was not an essential matter, this effectively shut down and stayed all foreclosure matters and no new actions could be filed in court. Local District Administrative Orders were additionally issued mirroring that no foreclosures could move forward until further order.
On March 21, 2020, Governor Cuomo also issued separate Executive Order 202.9 which directed the Department of Financial Services to "ensure under reasonable and prudent circumstances that any licensed or regulated entities provide to any consumer in the State of New York an opportunity for a forbearance of payments for a mortgage for any person or entity facing a financial hardship due to the COVID-19 pandemic." Said Order continues that "such application shall be granted in all reasonable and prudent circumstances solely for the period of such emergency." Thereafter, New York State Department of Financial Services enacted 3 NYCRR Part 119 which created a COVID relief program in order to create a forbearance program, which can be found here. This new regulation is not applicable to, and does not affect any mortgage loans made, insured, or securitized by any agency or instrumentality of the United States, any Government Sponsored Enterprise, or a Federal Home Loan Bank, or the rights and obligations of any lender, issuer, servicer or trustee of such obligations, including servicers for the Government National Mortgage Association.
On May 7, 2020, Governor Cuomo issued Executive Order 202.28 effective as of June 20, 2020, extending the moratorium on evictions and foreclosures through August 20, 2020. However, in this new Order, there is qualifying language as it specifically states that the defaulting party is "someone that is eligible for unemployment insurance or benefits under the state or federal law or otherwise facing financial hardship due to COVID-19 pandemic." Unlike 202.8, this is not a stay across the board, but the issue is how same is determined and by whom. It is unclear if any auctions or any new actions will be filed on June 20, 2020 based on the language in said Order, but as of this date, no new actions or auctions can take place through June 19, 2020. Separately, this will certainly cause many of the title underwriters concern for insurance purpose as the question will remain whether they can actually insure any actions that take place between June 20th and August 20th.
The courts have slowly been reopening throughout the state. While we cannot file new cases or hold an auction, the courts have allowed motions for non-essential cases (which would include foreclosures). There is no uniform rule herein as each court or judge seems to be interpreting Executive Order 202.8 on their own, therefore, it would be wise to contact the part prior to submitting any motions on pending cases.
On the federal level, the CARES Act was signed into law on March 27, 2020. Pursuant to same, homeowners with a federally backed mortgage loan who have been affected by COVID-19, regardless of delinquency status, can get a forbearance. A federally backed mortgage is one held by Fannie Mae, Freddie Mac, the VA, the USDA, FHA and HUD. This law also put a 60 day moratorium on all foreclosures. Under the CARES act, borrowers are entitled to request an initial forbearance of their monthly payments for up to 180 days and may request an extension of same. The servicer must give the forbearance requested without any documentation required and the amounts must be repaid but they can be done so over time. The original moratorium was to expire on May 17, 2020 but same was extended under the guidance of the Federal Housing Finance Agency through June 30th.
We continue to monitor all changes within the foreclosure arena. In addition, we have been tracking bills in New York State, one of which may contain a requirement to attempt to enter into a forbearance as a condition to commencing the foreclosure action. This is a fluid situation and we will apprise you of any further changes herein.
Advantage is here and available for any questions or concerns that may arise during these unprecedented times. Please contact David Schwartzberg, Esq. at firstname.lastname@example.org. We look forward to better days and seeing you in the near future.