On March 16, 2020, Governor Gavin Newsom issued Executive Order N-28-20. On May 29, 2020, Govern Newsom issued Executive Order N-66-20, which extends the protections of Executive Order N-28-20 to 60 days to a date of July 28, 2020. Executive Order N-28-20 authorizes local governments to stop any foreclosures. This means that judicial foreclosures brought pursuant Code of Civil Procedure Section 725(a) et seq, Code of Civil Procedure Section 1161 et. seq., and any other actions that may otherwise eject a residential or commercial tenant or occupant of residential real property after a foreclosure is suspended. This order remains effective until July 28, 2020, unless extended.
Banks and Foreclosure Relief
On March 25, 2020, California Governor Gavin Newsom entered into an agreement with, four of the five major banks in the United States—JP Morgan Chase, Citi, US Bank, and Wells Fargo—along with around 200 credit unions and state banks, who have consented to give homeowners mortgage payment relief during the coronavirus outbreak. Specifically, California Homeowners financially affected by the COVID-19 pandemic may receive a 90-day forbearance on mortgage payments. As part of the agreement with the Governor, the banks also agreed not to report late payments to the credit reporting bureaus. As such, late payments or lack of payments may not affect the credit scores of California Homeowners.
It is important to note homeowners should contact their loan servicers to request a forbearance or to see if they may qualify for payment suspensions. During this process, to get details on how to apply for relief, go to the official California Coronavirus (COVID-19) Response website. Homeowners may be able to work with lenders to enter or extend forbearance agreements if still experiencing continued financial hardship due to coronavirus.
Also, under the deal, financial institutions won’t initiate foreclosure sales or evictions, consistent with applicable guidelines, for at least 60 days, and, for at least 90 days, banks will waive or refund mortgage-related late fees to customers who request assistance.
California Courts Emergency Rules
The Judicial Council of California governs the rules and regulations for the courts in California. As such, any emergency rules that effect court closures and judicial hearings will be issued through the Judicial Council of California. On April 6, 2020, the Judicial Council of California issued emergency rules to account for the coronavirus (COVD-19) emergency.
The Judicial Council of California issued emergency rules about unlawful detainer matters and judicial foreclosure actions. Specifically, the Judicial Council of California issued Emergency Rule #2 to protect borrowers in judicial foreclosure actions.
- A court may not issue any decision or judgment in a judicial foreclosure action until 90 days after the Governor declares that the state of emergency related to the COVID-19 pandemic has been lifted unless the court finds that the action is required to further public health and safety. Note that these rules do not apply to non-judicial foreclosures, which is the most common way a lender pursues its collateral in California.
- Any statute of limitations governing a judicial foreclosure action is tolled until 90 days after the Governor declares that the statement of emergency related to the COVID-19 pandemic has been lifted.
- All periods for electing and exercising any rights in a judicial foreclosure action is extended until 90 days after the Governor declares that the statement of emergency related to the COVID-19 pandemic has been lifted. This may include the rights of redemption on foreclosure sales.
The emergency rules ensure that judicial foreclosures will remain on hold in California while the legislature aims to come up with a long-term plan to handle the multitude of evictions.
CARES Act (H.R. 748, CARES Act, Public Law 116-136)
On March 27, 2020, the president signed the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) into law. The CARES Act provides protections and has provisions that have placed a Moratorium on Residential Evictions (tenants) and Mortgage Payments and Foreclosure Proceedings (homeowners).
CARES Act – Homeowner Protections
Pursuant to the CARES Act, there is a 60-day hold on foreclosures beginning March 18, 2020, for people who have sustained losses as a result of COVID-19. These borrowers can also qualify for 180 days of forbearance. People who own multifamily properties can also access forbearance for up to 90 days if they do not evict their tenants or charge them late fees for failure to pay rent. These protections only apply to federally backed mortgage loans.
Borrowers or homeowners must send a notice to lenders of their inability to pay their mortgage due either directly or indirectly to the COVID-19 emergency. No additional documentation is needed, merely informing lenders of financial hardship caused by COVID-19 Emergency is sufficient. Upon receipt of this notice, Lenders are obligated and must grant an initial 180-day forbearance and cannot charge additional fees or penalties during the forbearance period. It important to note this forbearance period is not discretionary; meaning Lenders must grant the extension another 180 days upon a borrower’s request. Sec. 4022(b)(3).
The CARES Act also protects borrowers that were in default before the act was signed into law. The CARES Act provides for a 60-Day Moratorium on foreclosure proceedings. This meaning starting from March 18, 2020 lenders cannot initiate foreclosure proceedings in addition to the prohibition of foreclosure-related activities within a 60- day period against homeowners. See. Sec. 4022(c)(2).
CARES Act – Federally Backed Loans
In order to receive this protection under the CARES act, a borrower must have a federally backed mortgage loan. This applies to homes with one to fourth units or a multifamily home with five or more units. Federally backed mortgage loans are defined to include loans secured by any lien on residential properties and that are “made in whole or in part, or insured, guaranteed, supplemented, or assisted in any way, by any officer or agency of the Federal Government or under or in connection with a housing or urban development program administered by [HUD] or a housing or related program administered by any other such officer or agency, or is purchased or securitized by the Federal Home Loan Mortgage Corporation or the Federal National Mortgage Association.” Sec. 4024(a)(4) – (5).
The definition in Sec. 4022(a)(2) — which applies to the provisions in the Act regarding payment relief and a foreclosure moratorium for homeowners — includes all loans that are owned, insured or guaranteed by one of the following entities: HUD (including Federal Housing Administration loans, reverse mortgages and certain loans under programs for Native Americans and Native Hawaiians); the Department of Veterans Affairs (VA); the U.S. Department of Agriculture (USDA); and Fannie Mae or Freddie Mac.
Homeowners should know or have access to the information necessary to determine whether their properties have federally backed mortgage loans. Such information is available in the note or mortgage instruments themselves, other closing documents, servicing notices, account statements, or other correspondence, as well as loan look-up websites for both Fannie Mae and Freddie Mac. The Consumer Financial Protection Bureau provides resources homeowners to if their loan is federally backed.
Additional Foreclosure Moratorium for Fannie Mae, Freddie Mac, FHA, and VA Loans
On March 18, 2020, the Federal Housing Finance Agency (FHFA), which regulates Fannie Mae and Freddie Mac, announced a suspension of foreclosures, evictions, and foreclosure-related activities such as trustee’s sales for a minimum of 60 days. On May 14, 2020, FHFA announced it was extending the moratorium until at least June 30, 2020. The foreclosure moratorium applies to Fannie and Freddie-backed, single-family mortgages only.
The FHA also extended its foreclosure and eviction moratorium through June 30, 2020, for homeowners with FHA-insured single-family mortgages. The moratorium doesn’t include vacant or abandoned properties. Veterans Affairs, too, imposed a foreclosure moratorium on VA-guaranteed loans through June 30, 2020.