COVID Relief Updates: Mortgages, Debt Collection & Student Loans | McGlinchey Stafford


Since the start of the year and the change of presidential administration, a number of aid measures granted in response to the COVID-19 pandemic have been extended. Below you will find updates on the relief measures in place for mortgage foreclosures and evictions, Debt recovery, and student loan.

Extension of national moratoria on foreclosures and evictions

At the end of December 2020, before the change of presidential administrations, the Department of Housing and Urban Development (HUD) announced an extension from December 31, 2020 to February 28, 2021 of its moratoriums on foreclosures and evictions for single-family homes insured FHA. mortgages and REO properties due to the COVID-19 pandemic. This was the fourth extension of the FHA moratorium.

On January 19, 2021, a day before the change of presidential administrations, the Federal Housing Finance Agency (FHFA), which regulates government-sponsored entities (GSE), the Federal National Mortgage Association (Fannie-Mae) and The Federal Home Loan Mortgage Corporation (Freddie Mac), announced that it was extending GSE’s moratoria on foreclosures of single-family homes and evictions of real estate until February 28, 2021. This was the fifth extension of the moratoria on seizures and evictions of GSEs.

On inauguration day – January 20, 2021 – the newly installed director of the Centers for Disease Prevention and Control (CDC) announced an extension of the CDC’s order temporarily suspending residential evictions “until at least March 31, 2021. “. This latest extension of the CDC’s moratorium on evictions follows an earlier extension that reportedly expired on January 31, 2021 and was issued by Congress pursuant to the Consolidated Appropriations Act, 2021 and signed by former President Trump on December 27. 2020.

Many observers expect the aforementioned moratoria to be further extended by the FHA, FHFA and CDC, respectively, in the absence of a dramatic improvement in the COVID-19 outbreak nationwide. . The Biden administration has proposed further moratorium extensions as part of the administration’s $ 1.9 trillion stimulus package called the “America’s bailout,” which was unveiled on January 14, 2021. In As part of the plan, the Biden administration is asking the controlled Congress to extend national moratoriums on foreclosures and evictions until September 30, 2021. It is expected that Congress will adopt the plan, along with the proposed moratorium extensions, during the first 100 days of the Biden administration.

Debt Collection Relief Varies by State

In the world of debt collection, there is no large-scale federal withholding in place, and only state-specific relief has been enacted. The range of relief granted by state orders includes temporary bans on creditors from taking specific debt collection action, such as filing (or continuing) a debt collection lawsuit, garnishment wages, the seizure of property and repossession of a vehicle or the freezing of a bank account. Reference this previous alert for our recent coverage of the moratoriums on government debt collection.

As a result of these state enforcement orders, there has been a wave of consumer-related FDCPA actions filed. This increase includes both individual and collective actions. It also led to a wave of complaints to the Consumer Financial Protection Bureau (CFPB) leading to enforcement actions. Some recent enforcement actions are as follows:

On December 8, 2020, the CFPB issued a consent order against RAB Performance Recoveries, LLC (RAB). The consent order stemmed from the CFPB’s finding that during the period that RAB was obtaining judgments against consumers, RAB was not licensed in Rhode Island, New Jersey and Connecticut, as required to collect debts. The CFPB found that in violation of the Fair Debt Collection Practices Act (FDCPA), RAB had falsely claimed that it had a legally enforceable right to collect payments. The Consent Ordinance prohibits RAB from collecting on judgments, collecting on consumer payment agreements, requires RAB to take all necessary steps to overturn such judgments and suspend the collection of such judgments, and to inform consumers having payment agreements that they have been satisfied. The consent order also requires RAB to pay a civil fine of $ 204,000. A copy of the consent order can be found here.

The CFPB, together with the New York Attorney General, filed a lawsuit in the Western District of New York regarding alleged illegal methods of debt collection by debt collection companies and two individual owners and members. The complaint alleges that the defendants “participated in a debt collection transaction that used deceptive, harassing and inappropriate methods to entice consumers to make payments.” The complaint alleges that these acts constitute a violation of the FDCPA and the Consumer Financial Protection Act (CFPA) and seeks redress from consumers, restitution of ill-gotten gains, civil monetary penalties and injunction against the defendants. A copy of the complaint can be found here.

We expect FDCPA claims to continue to rise, with a peak expected after the foreclosure moratoriums expire.

Federal student loans withheld until September 30

At the request of President Biden, the acting Education Secretary will extend the hiatus on federal student loan payments and collections and keep the interest rate at 0%. No federal student loan payments are due and no delinquent student loans will be collected during this period. Voluntary principal payments will always be accepted.

Congress initially passed this student loan relief as part of the CARES Act in March 2020. Former President Trump extended this student loan relief twice, from September 30 to December 31, 2020, and again through until January 31, 2021. On the first day of his mandate, the Biden administration extended student loan relief for an additional eight months until September 30, 2021. This extension gives Congress more time to develop a plan and borrowers to prepare for repayment. In the meantime, about 41 million Americans will continue to benefit from the federal government’s hiatus on student loan repayments.

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