Post Emergency Evictions and Foreclosures. What is Happening Now and What to Expect in the Future?
More than a year ago, as Covid-19 descended upon us, lenders, federal, state, and local governments took action to help American Homeowners stay in their homes. Both foreclosure and eviction moratoriums were put in place, temporarily halting the initiation or continuation of foreclosure proceedings. What happens now?
UNPRECEDENTED FORECLOSURE AND EVICTION PROTECTIONS COMING TO AN END.
On March 27, 2020, The CARES Act (the Coronavirus Aid, Relief and Economic Security Act) was signed into law creating protections and moratoriums against eviction and foreclosures. As homeowners and tenants found themself furloughed from their jobs and unable to pay their mortgage or rental payments, the CARES Act, among other pieces of legislation at the Federal, State, and Local levels were signed into law and extended for months at a time. Covered tenants could not be forced to vacate and landlords could not file notices to vacate, until 30 days after the expiration of the moratorium, which ended on August 23, 2020. Almost immediately after the expiration of that protection, the CDC eviction moratorium took effect and was ultimately extended to June 30, 2021. Challenges were made to the CDC moratorium that struck down the CDC moratorium but for New York tenants and landlords, the state’s own moratorium remained in place and is currently set to expire on August 31, 2021.
Similarly, homeowners who fell behind on mortgages were given the forbearance periods and opportunities to apply for modifications of loans, and “mortgage payment” holidays were put in place. New York also signed the “Covid-19 Emergency Eviction and Foreclosure Prevention Act of 2020” into law, imposing a local foreclosure moratorium that permitted homeowners to sign a hardship declaration to delay foreclosure and eviction proceedings. These moratoriums are set to expire on August 31, 2021.
The End of the Emergency
On June 23, 2021, Governor Cuomo announced that the New York State of Emergency would end on June 24, 2021, and issued Executive Order 210 (click the link to review the entire order) declaring that executive orders issued from the beginning of the pandemic were no longer necessary as the state of emergency was lifted, affecting at least 113 Executive Orders that have been issued since Order 202 was issued on March 7, 2020.
What does the “End” mean for the real estate industry and for foreclosures and evictions in New York State?
Since the “end of the emergency” on June 24, 2021, local court contacts advised that eviction moratoriums remain in place until August 31, 2021, despite the Governor’s declaration that those provisions were no longer necessary. Those same court contacts also advised that the courts are expecting a tremendous influx of cases and court dates in the days ahead as moratoriums lift and things start getting back to normal. To combat the overflow, courts are reassigning judges to specialty parts that handle foreclosures and eviction proceedings so that there will be additional bandwidth to handle matters before the courts. Even with these adjustments and accommodations, many cases filed now are being assigned court dates into 2022.
Will Landlords Survive?
Landlords say they may not survive until August 31, 2021. One local landlord stated in a recent article that he still has to pay his bills even if his tenants don’t pay the rent. Even though there may be hardship relief for landlords so they can avoid filing foreclosure, that doesn’t help pay the gas, electric, repair bills, and more. And for many landlords, tenants took advantage of the ability to avoid paying rent and left properties in disrepair. Without rent coming in, landlords may be unable to repair the building and when they try to sell are suffering tremendous financial loss and the loss of their livelihood. These financial hardships will not be remedied overnight.
Landlord clients who have found rentals and rental rates sharply decline over the last year may be in even more desperate straits than they were pre-pandemic, as the need for financial security and reimbursement grows. According to some experts, while median rents in New York City may be slowly creeping up, “the city is in this rent depression for the long haul.”
All of these factors impact a landlord’s tolerance for financial risk and can be expected to impact what happens in court as cases begin moving forward. There are a number of rental relief programs available to assist in repaying arrears as the moratoriums lift and cases move forward. ( New York State ERAP (emergency rental assistance program)
A Wave of Foreclosures On the Horizon
For homeowners at risk of foreclosure, it looks like lenders and the courts will continue to be lenient and liberal in granting loan modifications. As recently as June 28, 2021, the CFPD (Consumer Financial Protection Bureau) finalized new protections for homeowners struggling to make mortgage payments due to the pandemic but said foreclosures will be allowed to resume as those protections are put into place. That agency is working to prevent a wave of foreclosures as 900,000 homeowners start to exit the Covid-19 mortgage “holiday” or “forbearance period. Read the Reuters article here) Under the CFPD rules, mortgage services will be required to undertake additional pre-foreclosure protections, including making a greater effort to reach out to struggling borrowers. From August 31, 2021, through December 31, 2021, mortgage services may only refer 120-day delinquent accounts for foreclosure provided at least one of three new safeguards have been met. (the borrower has been evaluated and there are no available options to avoid foreclosure, the property is abandoned, the borrower is unresponsive to servicer outreach.)
11 Million Americans Behind on Rent
As the courts begin returning to “business as usual” and more cases start to appear on daily calendars, homeowners at risk of foreclosure and tenants in arrears on their rent need to be prepared and know their options. According to Mortgage Bankers Association, about 2.1 million homeowners are still in forbearance with suspended mortgage payments. Another 1.8 million families are not in forbearance but are at least 90 days delinquent on paying their mortgages. A recent CNBC article (link here) stated that more than 11 million Americans are behind on their rent and possibly facing eviction as various eviction moratoriums expire. Some experts estimate that the country’s rental arrears could be as high as $70 billion dollars.
Is Help on the Way?
Some New York renters in arrears may qualify for ERAP, a rental assistance program available to provide significant economic relief to low and moderate-income households. On June 1, 2021, applications were being accepted for the program. Applications can be filed online 24 hours a day, 7 days a week. Several counties throughout the state have opted to administer funds through their own programs including the City of Rochester and Monroe County, the City of Yonkers, Onondaga County, and the towns of Hempstead, Islip, and Oyster Bay Landlords should know that they can also start the process on behalf of tenants.
If you are a homeowner struggling to pay your mortgage, the good news is that some lenders will not be starting mortgage foreclosures until 2022, a date that may become the rule under the CFPB’s “roadmap for the forbearance exit.”
Deployment of rental assistance programs has been incredibly slow and many of those impacted have not yet been able to access the funds needed to bring their rent and mortgages up to date. Both the CDC and The Biden Administration have extended moratoriums on foreclosure and evictions for nonpayment until July 31, 2021. It seems clear that when the current moratoriums end in the next two months, they will not be extended.