As many of you likely already know, the federal government, though the United States Department of Housing and Urban Development ("HUD") and the CARES Act issued moratoriums of mortgage foreclosures and evictions for non-payment of rent. On December 17, 2020, HUD issued its Mortgagee Letter 2020-43, which extended the foreclosure and eviction moratorium as a result of COVID-19. With this latest order the moratorium on residential foreclosures and evictions is extended until February 28, 2021.
There are, however, a couple of important caveats to this order. First, it is important to keep in mind that the moratorium does not prevent a condominium or homeowners association from seeking foreclosure for unpaid assessments. Accordingly, we have advised many of our clients to continue aggressively pursuing the collections of its assessments. In situations that associations may be hesitant to proceed with the filing of foreclosure because there is a bank foreclosure pending or imminent, we would recommend that the associations strongly consider proceeding with its own foreclosure action. The reason being, the longer the banks are delayed from proceeding, the more likely the chance that the association will be able to finish its own foreclosure action resulting in a foreclosure sale.
Second, the moratorium excludes vacant or abandoned properties. In other words, if the residents of the property have already vacated the subject property, the moratorium does not apply, and foreclosure and/or eviction may proceed in the ordinary course. This is important to keep in mind, because often the banks holding the mortgages do not have any idea on the status of the occupancy of the unit, and as a result will assume the property is occupied. This assumption will usually cause the banks to treat all properties as being affected by the moratorium summarily delaying the proceedings. Through close consultation with the associations where many of these properties exist, our office has been successful in opposing the bank's motions to cease proceedings by informing the courts that the moratorium is inapplicable to vacant properties. Such opposition typically results in the courts ordering the mortgage foreclosure case to proceed in the ordinary course. With so many properties ultimately being acquired by the banks holding the mortgages, resulting in the associations having to accept the statutory safe-harbor amounts, the sooner the foreclosure process concludes, the sooner the associations can begin to receive regular payment of its assessments. In those situations that the moratorium does affect the foreclosure process, there is no reason why associations cannot pursue motions to have mortgage foreclosure sales rescheduled after the moratorium is set to expire, and in that way try to ensure the case comes to a swift conclusion once the moratorium expires.
Third, the moratorium only applies to FHA-insured mortgages. Therefore, non-FHA mortgages, privately held mortgages or non-residential mortgages are not restricted from filing foreclosure or eviction. This is similarly worth investigating to make sure foreclosure proceedings are not being halted unnecessarily.
Of course, these options and decisions should be reviewed with competent legal counsel before proceeding.
SACHS SAX CAPLAN P.L.
Peter S. Sachs