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Foreclosure Protection and Relief

Consumer

Are you at risk of missing a mortgage payment because of financial hardship caused by the COVID-19 pandemic?

You’re not alone and you may qualify for financial assistance!

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Many homeowners suffered a loss of income during the COVID-19 pandemic. If you’re coming to the end of a forbearance plan, falling behind on your mortgage payments or are in danger of foreclosure, you should contact your mortgage servicer immediately to determine what programs they offer that could help you keep your home, including loan modification and forbearance.  

Recently added federal protections also require mortgage servicers to communicate honestly with homeowners, explain their options to avoid foreclosure, and be transparent about critical deadlines. For additional assistance, contact a HUD-certified housing counselor at 1-800-569-4287. 

If you experienced a financial hardship during the pandemic, you may also qualify for state aid through the California Housing Finance Agency (CalHFA) Homeowner Assistance Fund, a program that is scheduled to open for applications in Fall of 2021. To receive notifications about the status of this program, sign up for “California Mortgage Relief” updates from CalHFA.

Determining What Type of Loan You Have

You can look up who owns your mortgage online, call, or send a written request to your servicer asking who owns your mortgage.

Communication is key —

Talk to your mortgage servicer as soon as you think you might fall behind on a payment. If you lost your job or saw a change in income, can pause foreclosure by submitting a loss mitigation application to your servicer.

Although it may feel overwhelming to reach out directly to your mortgage servicer and explain your situation, it’s the best place to start. State and federal homeowner protections require mortgage servicers to help you explore options to avoid foreclosure. 

You can find information about your mortgage servicer on your monthly mortgage statement. Talking or writing to your servicer as soon as possible will help you avoid defaulting on your loan and get you back on track with a plan that works for you. 

Your servicer will screen you for available options such loan forbearance or loan modification and advise you about what information they need from you to determine the best plan for you. In some cases, your mortgage servicer will only need information you can provide during a telephone call. In other cases, they may request detailed information in writing about the property, your income and assets, and your monthly expenses. Check out this handy FAQ and checklist from the Department of Real Estate

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If you have missed a mortgage payment, know your rights.

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California homeowners have additional protections thanks to the California Homeowner Bill of Rights (HBOR). HBOR provides protections to homeowners who are at risk of foreclosure. If you own and live in your home, HBOR generally applies to your first lien mortgage. Key HBOR provisions require your mortgage servicer to:

Notify you of your options to avoid foreclosure

Your mortgage servicer must try to contact you, in person or by phone, at least 30 days before starting the foreclosure process. Your mortgage servicer must do the following:

  • Explore options to avoid foreclosure
  • Provide you with ways to contact Department of Housing and Urban Development (HUD) counselors.

Your mortgage servicer should not begin foreclosure action until the above have been performed.

Include critical resources on their website

Your mortgage servicer should maintain readily available information (links) on its website homepage to provide you with:

  • Foreclosure-prevention options and instructions.
  • A list of financial documents necessary when discussing foreclosure-prevention options.
  • Mortgage servicer contact information and HUD-certified housing counselor.

Single Point of Contact

When you request a loan modification or other foreclosure-prevention option, your mortgage servicer must promptly establish a single point of contact (SPOC), which may be an individual or team to assist you with the process.

  • The SPOC should guide you through application requirements and deadlines
  • The SPOC should provide you with the status of your application
  • The SPOC should inform you of missing documents or information needed to complete your application
  • The SPOC should have access to personnel with authority to stop or pause foreclosure proceedings, when necessary, during the application evaluation period.

Keep you in the loop about the loan modification process, including pointing out any missing information

Within five business days of your loan modification application submission, your mortgage servicer is required to acknowledge the submission; offer a description of the loan-modification process; point out any missing information or other errors; and let homeowners know of all deadlines for completing the application.

Avoid fees

  • You should never pay any fees to apply for any options to avoid foreclosure.
  • Your mortgage servicer should never collect any late fees while the complete loan-modification application is under consideration.

Inform you of your denial rights

Your mortgage servicer must inform you in writing of the reasons your loan modification application was denied and must: 

  • Give you at least 30 days to appeal the denial 
  • Allow you to submit a new loan modification application if material changes in your financial situation have occurred since the last application 
  • Inform you of other available foreclosure-prevention options.

Pause foreclosure to honor a loan modification application and avoid “dual tracking

Your mortgage servicer cannot start or continue with the foreclosure process while you have a complete loan modification application under review, a process called “dual tracking.” This restriction includes any appeal period after a denial. 

Your mortgage servicer cannot foreclose on your home if you are complying with the terms of an approved loan modification, forbearance, repayment plan, or other foreclosure-prevention option. This restriction applies even if your loan is transferred to another mortgage servicer. 

If you believe your mortgage servicer did not comply with the Homeowner Bill of Rights, you may do the following: 

Was your forbearance request denied?

The COVID-19 Small Landlord and Homeowner Relief Act may impose certain requirements on your servicer before it can deny your forbearance request.  

Mortgage repayment

If you’re having a hard time paying your mortgage, there’s several repayment options.

Repayment Options by Federal Agency (https://www.consumerfinance.gov/repay-forbearance)

Just as mortgage forbearance may differ between the federal agencies, Fannie Mae, or Freddie Mac, so does the repayment of the amounts that were suspended during the forbearance. The following information provides some of the specific repayment options offered by each agency.

Fannie Mae & Freddie Mac Loans

Homeowners with mortgages owned or guaranteed by Fannie Mae or Freddie Mac may be eligible for different repayment options following your forbearance. Fannie Mae and Freddie Mac do not require a lump sum payment at the end of the forbearance.

  • If you are unable to repay your missed payments all at once and can afford to pay a higher monthly mortgage payment for a period of time, you may be eligible for a repayment plan, which allows you to repay past due amounts over a period of time.
  • If you can afford to resume your regular monthly mortgage payment you may be eligible for a payment deferral , which puts your missed mortgage payments into a payment due at the sale or refinancing of your home, or at the end of the loan.
  • If you have a sustained reduction in income and are unable to afford your regular monthly mortgage payment, you may be eligible for a loan modification which changes the terms of your loan to enable an affordable payment.

Servicers will reach out to you about 30 days before your forbearance plan is scheduled to end to determine which assistance program is best for you at that time. Work with your servicer to determine which option you are eligible for.

FHA/HUD Loans

HUD/FHA does not require lump sum repayment at the end of the forbearance. Homeowners on special COVID-19 forbearance will be assessed by their servicer first for eligibility for FHA’s COVID-19 Recovery Standalone Partial Claim home retention option no later
than at the end of the forbearance period.

The COVID-19 Recovery Standalone Partial Claim is for homeowners who can resume making their current monthly mortgage payments in the future. The COVID-19 Recovery Standalone Partial Claim places amounts you owe into a subordinate lien that is repaid only when you refinance your mortgage, sell your home, or your mortgage otherwise terminates. This lien does not accrue interest.

If you cannot resume making your existing monthly mortgage payment, servicers of FHA-insured mortgages will assess you for the COVID-19 Recovery Modification. The COVID-19 Recovery Modification extends the term of the mortgage to 360 months at a fixed rate and targets reducing the principal and interest portion of your monthly mortgage payment. 

For more information on Federal Housing Administration Mortgages: answers@hud.gov, call 1-800-CALL-FHA (1-800-225-5342), or view HUD’s information for homeowners.

USDA Rural Housing Service Guaranteed Loan Mortgages

USDA Rural Housing Service does not require a lump sum payment at the end of the forbearance. If you can resume making regular payments your servicer or lender should either offer an affordable repayment plan or term extension to defer any missed payments to the end of the loan. If you are unable to resume making regular payments, your servicer or lender should evaluate you for all available loss mitigation options.

Upon completion of the forbearance, the lender shall communicate with the borrower and determine if the borrower is able to resume making regular contractual payments. If so, the lender shall offer the borrower a written re-payment plan to resolve any amount due or, at the borrower’s request, extend the loan term for a period that is at least the length of the forbearance.

Visit USDA Rural Development’s coronavirus website for more information on forbearance for USDA guaranteed loans.

VA Loans

Servicers of VA loans cannot require borrowers to make a lump sum payment immediately after a borrower exits a CARES Act forbearance.

VA has a suite of loss mitigation options such as repayment plans and loan modification to assist borrowers in repaying payments missed under a CARES Act forbearance. In addition, VA is continuing to evaluate other options to further assist borrowers affected by COVID-19 national emergency.

Native American Direct Loans (NADL) are managed by BSI Financial Services. NADL borrowers can request a forbearance plan by contacting the BSI default resolution team at 800-327-7861 or customercare@bsifinancial.com.

For additional information, please visit VA’s website , where you can find a list of frequently asked CARES Act questions . In addition, you may call (877) 827-3702 to contact a VA Regional Loan Center.

For Non-federally Backed Loans

Check with your loan servicer for the forbearance repayment options that they offer. You may be able to find information about forbearance programs by checking the websites of your lender and servicer for more detailed information. Be sure to inquire about what limitations, options, and fees may apply to repayment of your loan due to the fact that it is not federally backed.

When to Get Help

Consult a HUD-certified housing counselor if your servicer has filed a notice of foreclosure on your home, but has failed to fulfill any of its responsibilities listed above.

Find a HUD-certified housing counselor today https://www.hud.gov/findacounselor.

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The Homeowner Bill of Rights allows you to seek legal action from injuries caused by a violation of the law

You can also report violations to us, the California Attorney General’s Office, or the Consumer Financial Protection Bureau.

Homeowner Checklist

A Homeowner’s Guide to Foreclosure in California (DRE)

  • Contact your mortgage servicer—the sooner, the better. The sooner you make contact, the better your negotiating position. You are in the best negotiating position when you make contact before you miss a single mortgage payment. 
  • Ask to negotiate a plan to avoid foreclosure.
  • Work with your servicer to negotiate alternative or optional mortgage loan terms that are acceptable to both parties.
  • Pay attention to any contact (mail or telephone calls) from your servicer.
  • Remember your servicer may have an incentive to arrive at a modified or restructured mortgage loan payment. Stay proactive in your efforts.
  • Learn more: https://dre.ca.gov/files/pdf/foreclosure_guide2020_re15.pdf

Homeowners: What Not to Do

A Homeowner’s Guide to Foreclosure in California (DRE)

  • Avoid communicating with your servicer – Communicating with your servicer is important to assess your financial situation and your options to avoid foreclosure. Furthermore, if your servicer tries to reach out to you for 30 days and you do not respond, the servicer may file a notice of default after the 30-day period and start the foreclosure process.
  • Walk away from or abandon the home – If you abandon your home and mortgage, your servicer may begin the foreclosure process once your loan becomes delinquent. This will not necessarily end your obligations related to the loan. You can still be liable for any losses following a foreclosure sale and for any junior loans. In some instances, additional consequences may be imposed on the homeowner.
  • Trash the home – Damaging your home could result in a smaller surplus paid to homeowner after foreclosure if homeowner has equity. If there is serious damage to the home, you may also be criminally prosecuted or sued for damages.

In your corner — new CFPB COVID-19 ruling provides additional safeguards and protections

The Consumer Financial Protection Bureau issued the 2021 Mortgage Servicing COVID-19 Rule to assist homeowners impacted by the pandemic.

Mortgage servicers have to satisfy additional safeguards before foreclosing, may streamline loan modification options to help support struggling borrowers, and must provide live contact to homeowners who are delinquent.

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See any information that needs to be corrected or updated? Email us at webmaster@dfpi.ca.gov.

Last updated: Oct 20, 2021 @ 12:55 pm