Avoiding the effects of the latest HUD Foreclosure/Eviction Moratorium
February 12, 2021
As many of you already know, the federal government, through the United States Department of Housing and Urban Development (“HUD”) and the CARES Act, issued moratoriums of mortgage foreclosures and evictions for non-payment of rent. On December 17, 2020, HUD issued Mortgage Letter 2020-43, which extended the foreclosure and eviction moratorium as a result of COVID-19. With this latest order, the moratorium on residential foreclosures and evictions is extended through March 31, 2021.
There are, however, three important caveats to this order. First, it is important to keep in mind that the moratorium does not prevent a condominium or homeowners association from seeking foreclosure for unpaid assessments. Accordingly, condo boards should be aggressively pursuing the collections of its assessments. In situations where associations may be hesitant to proceed with the filing of foreclosure because there is a bank foreclosure pending or imminent, we would recommend that the associations strongly consider proceeding with its own action. The reason being that the longer the banks are delayed from proceeding, the more likely it is that the association will be able to finish its own action, resulting in a foreclosure sale.
Second, the moratorium excludes vacant or abandoned properties. If the residents of the property have already vacated the property, the moratorium does not apply, and foreclosure and/or eviction may proceed. This is important to keep in mind, because the banks holding the mortgages often do not have any idea of the status of the occupancy of the unit, and as a result will assume the property is occupied. This assumption will usually cause the banks to treat all properties as being affected by the moratorium, summarily delaying the proceedings. Condo associations through their attorneys have been successful in opposing bank motions to cease proceedings by informing the court that the moratorium is inapplicable to vacant properties. Such opposition typically results in the courts ordering the mortgage foreclosure case to proceed in the ordinary course.
Third, privately held mortgages of non-residential mortgages are not restricted from filing foreclosure or eviction. This is similarly worth investigating to ensure that foreclosure proceedings are not being halted unnecessarily.