New federal rules restricting foreclosures now apply to a majority of homeowners, a federal agency said Tuesday, softening the blow for struggling borrowers as a foreclosure ban nears sunset. The new rules, which create extra foreclosure protections for borrowers, are set to kick in on August 31, but they now apply immediately to borrowers with loans backed by Fannie Mae and Freddie Mac, said the Federal Housing Finance Agency, which regulates Fannie and Freddie.
Home loans backed by Fannie and Freddie—which make up some 70% of all single-family mortgages in the U.S.—are currently subject to a moratorium on foreclosures that’s in effect until July 31. Another federal agency, the Consumer Financial Protection Bureau, issued rules on Monday that prohibit lenders from foreclosing on homeowners without first making an extra effort to get them into a loss mitigation program, but those rules don’t kick in until August 31. The new FHFA rule covers the gap between these two protections.
The rules are also meant to soften the blow for homeowners who are running out the clock on special pandemic forbearance plans, which had allowed them to skip mortgage payments for up to 18 months.
“The COVID-19 pandemic has created many financial challenges for families. Through no fault of their own, many of these families had to rely on COVID-19 forbearance to stay safe in their homes during the pandemic,” said Sandra L. Thompson, who was appointed acting director of the FHFA last week, in a statement. “Today, many families' finances are improving, allowing them to exit forbearance. The protections FHFA is putting in place today will protect vulnerable families as they begin their financial recovery from the impact of the COVID-19 pandemic.”
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