Eviction/Foreclosure Moratorium Changes and the Consumer Financial Protection Bureau’s Final Rule on Foreclosure

On June 24, 2021, the Centers for Disease Control (CDC) extended its eviction moratorium order which was set to expire on June 30, 2021.  According to CDC Director Dr. Rochelle Walensky, the eviction moratorium will now expire July 31, 2021 and is intended to be the final extension.

Just a few days later, the U.S. Supreme Court denied a request by a group of landlords to allow a federal judge’s decision to block the eviction moratorium to go into effect nationwide while litigation disputes continued to vacate a stay order from Federal Judge Dabney Friedrich that declared the CDC moratorium unlawful (see “Federal Judge Dabney Friedrich Vacates CDC Nationwide Eviction Moratorium”). Washington-based U.S. District Court Judge Dabney Friedrich ruled in favor of the landlords in May 2021 but put her ruling on hold pending the government’s appeal in the case. The landlords appealed to the Supreme Court after a lower appellate court rejected their request to unfreeze Judge Friedrich’s ruling. The landlord groups, led by the Alabama Association of Realtors, sued to challenge the moratorium, arguing that the CDC exceeded its authority under a federal law called the Public Health Service Act. They wrote in court papers: “Congress never gave the CDC the staggering amount of power it now claims.”  The groups said an eviction ban is no longer needed for public health reasons in light of declining COVID-19 cases and deaths. They also cited the CDC’s May 13, 2021 announcement that vaccinated people no longer need to wear masks or practice social distancing indoors.

While denying the request, the Supreme Court is allowing the CDC’s extension of the eviction moratorium to July 31, 2021. According to the Court, the extra few weeks from the extension will “allow for additional and more orderly distribution of the congressionally appropriated rental assistance funds.” Further extension would require authorization by Congress. The decision was 5-4, with Chief Justice John Roberts and Justice Brett Kavanaugh joining the court’s three liberal justices to deny the landlords’ request.

Landlords nationwide have been losing more than $13 billion in unpaid rent every month as a result of the CDC’s ban, the groups said.

Also, a final rule has been issued by the Consumer Financial Protection Bureau (CFPB) extending its foreclosure moratorium through August 31, 2021. When the moratorium ends, lenders will have limited circumstances when the foreclosure process can resume without waiting out a review period that lasts until the end of 2021.

Under the CFPB final rule, mortgage service providers can proceed with foreclosures in the following instances:

• After an evaluation, including a loss mitigation application being completed and submitted by the borrower to the loan servicer, no options other than foreclosure exist for the borrower after exhausting all foreclosure avoidance options.
• Confirm that the property has been abandoned under local and state laws.
• The borrower is behind in mortgage payments for more than 120 days before March 1, 2020.
• The borrower is behind in mortgage payments for more than 120 days and has been unresponsive to the servicer for more than 90 days.

For borrowers who are behind on their mortgage, the CFPB agrees that loan servicers need to give homeowners at least three options to avoid losing their home:

1. Resume regular payments and move any missed or suspended payments to the end of the mortgage,
2. Modify the loan’s length or interest rate, or
3. Sell the home.

These new safeguards are designed to take place before foreclosure proceedings start and will be in effect from August 31, 2021 to January 1, 2022.  These safeguards are in addition to existing rules that bar loan servicers from starting the foreclosure process until a homeowner is more than 120 days delinquent on their home loan.

As long as loan servicers follow these new protocols, the CFPB’s rule will not block servicers from starting the foreclosure process.  CFPB Acting Director Dave Uejio said  “Let me be clear: our final rule does not impose a foreclosure moratorium.”

Posted by Attorney Brian S. Weinstock. Weinstock concentrates on real estate and corporate transactional law, workers’ compensation, insurance defense, and other civil and commercial litigation. For businesses, he provides financial and legal analysis as well as operational strategies and ideas to manage risk.

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