• Vilariño & Associates

Foreclosures and evictions are halted!

Updated: Aug 9

The CDC extends until July 31 the suspension of these judicial proceedings, a determination that, according to a bankruptcy lawyer, points to an avalanche of these proceedings starting in August.


The Center for Disease Control and Prevention (CDC) issued Thursday

(https://www.elnuevodia.com/topicos/cdc/) issued this Thursday a new order to extend the moratorium or suspension of the process of eviction of homes for another 30 days, that is, until July 31.


With this determination, the federal agency extended the moratorium period that expired on June 30, in order to avoid an increase in the number of Covid-19 infections and, at the same time, allow vaccination efforts in the United States to continue to make progress, especially in lower-income households, and therefore, those most vulnerable to losing their homes.


However, according to bankruptcy attorney Javier Vilariño, the short extension of time just granted by the CDC confirms that the U.S. government is beginning to end the palliative and emergency measures it put in place as a result of the coronavirus pandemic.


Countdown

For those who have faced problems paying their obligations, particularly their mortgage payments, the federal determination means that foreclosure proceedings could resume as early as next August.


"There is a palpable drop in bankruptcy petitions because the foreclosures

(foreclosures) are not being handled in the courts and because of the relief that is out there," Vilariño said.


But according to the attorney, the plethora of direct aid to individuals could actually be "creating a bubble" in terms of foreclosure proceedings both on the mainland and in Puerto Rico.


The CDC acknowledges such a possibility in its order by stating that "an unprecedented and avoidable increase in evictions is likely to occur if the nationwide moratorium were to end on June 30."


According to the CDC order, a U.S. Census Bureau survey indicates that there has been an increase in the number of households in rent arrears, which means that they understand that they could face a foreclosure process in as little as two months.


Office of the Commissioner of Financial Institutions Data

(https://www.elnuevodia.com/topicos/oficina-del-comisionado-de-instituciones-financieras/) (OCIF) indicates that during 2020, some 10,236 loans were under some type of payment suspension or modification mechanism, including moratoriums, payment agreements, or restructurings.


But as of last March, according to OCIF, 8% - or some 31,510 - of all residential mortgage loans in Puerto Rico were 90 days past due, a period that is considered the prelude to a foreclosure process. Another 10,912 loans are already in foreclosure.


As a result of the pandemic, the federal government implemented - in general terms - two palliatives for homeowners and renters: the suspension of foreclosure proceedings and the granting of grace periods to postpone mortgage payments or moratoriums.


According to Vilariño, the suspension of foreclosures (https://www.elnuevodia.com/negocios/banca-

finanzas/notas/tribunal-federal-reafirma-la-paralizacion-de-ejecuciones-hipotecarias/) has been in effect since March of last year, especially when it comes to loans guaranteed by federal agencies such as the Federal Housing Finance Administration (FHA), the Veterans Administration and the federal Department of Agriculture (https://www.elnuevodia.com/topicos/departamento-de-agricultura-federal/) (USDA), have been on hold. In the case of Puerto Rico, such suspension has followed the CDC schedule in the orders issued by the federal judge.

Gustavo A. Gelpí

(https://www.elnuevodia.com/topicos/gustavo-gelpi/).


The moratoriums

However, according to Vilariño, the other benefit for consumers has been the postponement of their mortgage payments.

(https://www.elnuevodia.com/topicos/moratoria/) and that remedy is no longer necessarily available for conventional mortgages owned by government mortgage lenders FannieMae or FreddieMac.


Hence, according to Vilariño, little by little, the banks "have been waking up" and are beginning to order their procedures to resume foreclosures to those who do not pay.


Vilariño said that in the past months, the number of merchants seeking help has been on the rise, but stresses that "behind the bankruptcy of the business, employees are arriving because they are out of work and cannot pay".


The Consumer Financial Protection Bureau (FPCB) states that in the case of a mortgage guaranteed by FHA, Veterans Affairs or federal Agriculture, the deadline for requesting a first moratorium is (https://www.elnuevodia.com/negocios/banca-

finanzas/notas/conoce-como-funciona-la-moratoria-de-pagos-de-prestamos-estudiantiles/) in payments due to the pandemic is September 30, 2021.


For those who received that special treatment on or before June 30, 2020, the deadline to apply for an extension is next Wednesday, June 30. The time extensions, however, would only be for three months, the FPCB says.


When the moratorium on payments ends

Vilariño explained that those consumers who are in a moratorium and understand that they cannot comply with their payments, should go to the financial institution and start a loss mitigation process.


The duration of a moratorium depends on the agreement each consumer has reached with their financial institution and the form of repayment as well. Typically, the agreement may include deferring suspended payments until the end of the loan or making installment payments concurrent with the monthly mortgage payment to cover the number of months the loan was missed.


But according to the lawyer, the loss mitigation process will not necessarily slow down the foreclosure proceedings, once they are resumed.


"I have had cases in which the person in loss mitigation has been sold the house," said Vilariño.


In that sense, the lawyer said that if the consumer has some level of income, there is a high probability that a bankruptcy process will serve to retain the home. This is because while the financial institution would not accept the entry of family members to assist in the payment of the mortgage, for example, this could be feasible in a debt adjustment process through the court.


Source - El Nuevo Día , https://www.elnuevodia.com/autor/joanisabel-gonzalez/


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