Reed Smith In-depths

As the American economy learned to adapt to the COVID-19 pandemic, the initial dread of a financial collapse gradually waned. With a new sense of cautious optimism forming and the nation emerging from the pandemic, certain consumer protections and restrictions are beginning to lift. For instance, on July 31, 2021, the Federal Housing Finance Agency (FHFA) and Federal Housing Administration’s (FHA) foreclosure moratorium on federally-backed mortgage backed loans expired. Absent further action by the FHFA, FHA, or Congress, a servicer of a federally backed mortgage loan may now commence a foreclosure action, or move for a foreclosure judgment, order of sale, or execute a foreclosure-related eviction or foreclosure sale.

However, not all federal consumer protections have been lifted. On Aug. 3, the Centers for Disease Control and Prevention (CDC) issued another temporary Order extending the federal moratorium on evictions through Oct. 3, in areas of heightened levels of community transmission. Note: On Aug. 26, however, the U.S. Supreme Court declared the CDC’s eviction order to be unconstitutional, in a 6-3 decision.

Similar to their federal counterparts, individual states vary on lifting or extending COVID-related moratoriums. Embedded is a comprehensive spreadsheet capturing the current orders, legislation, and policies on foreclosures and evictions.

The following list outlines current orders and legislation from California, the District of Columbia, Illinois, Maryland, New Jersey, New York, Ohio, and Virginia, involving foreclosures and evictions in response to COVID-19.

California: On June 28, Gov. Gavin Newsom signed Assembly Bill 832, which extended the state’s eviction moratorium to Sept. 30. AB 832 further extends the protections of the COVID-19 Small Landlord and Homeowner Relief Act of 2020 (Homeowner Act) until Dec. 1. The Homeowner Act requires, in part, that mortgage servicers provide written notice to a borrower if the mortgage servicer denies a forbearance request. Under the Homeowner Act, if a mortgage servicer denies a forbearance, it must provide the reasons for the denial so long as the borrower was: (1) current on payments as of Feb. 1, 2020; and (2) experiencing a financial hardship that prevents the borrower from making timely payments on the mortgage obligation, due – directly or indirectly – to the COVID-19 emergency.

District of Columbia: The moratoriums on foreclosure and eviction actions remain in effect until 60 days after the end of the state of emergency. To date, Mayor Muriel Bowser has not lifted the COVID-19 state of emergency. 

Illinois: The moratorium on evictions and foreclosures expired on July 24 and its phase-out was completed Aug. 31. On July 23, Gov. J.B. Pritzker issued an Executive Order allowing eviction filings to begin on Aug. 1. After Aug. 31, enforcement of all eviction orders will be permitted.

Maryland: The state’s emergency declaration lifted on July 1. A 45-day grace period ran out on Aug. 15; so now, eviction or foreclosure actions can be commenced. 

New Jersey: On Aug. 4, Gov. Phil Murphy signed new legislation and issued Executive Order No. 249 that winds down the eviction and foreclosure moratoriums. Under the new legislation, renters who missed payments would be protected from eviction through Aug. 31, if their annual household income is less than 120% of their county’s median income. For tenants who make less than 80% of the median income in their county, tenants are shielded from an eviction judgment through Dec. 31. Under the legislation, tenants are afforded a private right to a cause of action with regard to a landlord’s violation of eviction protections. Additionally, the state Attorney General’s Office may impose monetary penalties for non-compliance, including a $500 fine for the first violation, $1,000 for a second violation, and $2,500 for each subsequent violation.

Meanwhile, for mortgage borrowers, New Jersey’s new legislation effectively ends the foreclosure moratorium on Nov. 15.