Date: December 20, 2020Author: Joshua Denbeaux
The federal government moratorium on foreclosure filings is going to end soon. It is scheduled to expire on January 31, 2021. I think it is going to be extended again for a few months.
But don’t get fooled, no matter how long the federal foreclosure moratorium is extended, foreclosures are going to start right away in 2021.
I probably sound a bit like Chicken Little at this point, seeing as back in June I published video about how foreclosures were going to restart September 1.
Well, THAT didn’t happen. So why should you listen to me now?
Here’s why – the FHA moratorium was extended from September 1, to December 31 and now to January 31, 2021. All servicers of all residential mortgages have delayed starting foreclosures, even if their loans were not owned by the federal government (and therefore required to be put on hold).
But there are three types of mortgage servicers, and they are going to respond differently to the continued moratorium, when it is (likely) extended beyond January 31, 2021.
The mortgage loans that are owned by the mortgage servicers themselves, and the mortgage servicers that service for the big investment banks – think Goldman Sachs – they don’t care about the federal moratorium, and they don’t care about their ‘brand value’ or what everyday Americans think of them.
Their ‘customers’ are not everyday Americans but Hedge Funds. And with apologies to Mitt Romney, no, hedge funds are NOT people too.
They don’t have a pulse and they don’t care about how the business practices affect the little guy. We are all just numbers on a spreadsheet.
So far, these companies have held off on filing many foreclosure complaints, but the scuttlebutt on the street is the hold ends December 31, 2020. Get ready, folks, because these companies are going to start filing foreclosures immediately in 2021.
The big consumer banks that own mortgage loans – think Wells Fargo and Bank of America – service mostly private mortgage loans and are also not obliged by law to honor the federal moratorium on foreclosure filings.
They have, though, because they do have a brand value that is worth billions. Again, we are nothing but numbers on a spreadsheet to those banks but now the Brand Value on the other side of the ledger.
The suspicion amongst other experts in defending foreclosure is that these banks are mostly going to abide by the moratorium. That is not guaranteed, though, and I certainly expect them to start filing some foreclosure complaints … perhaps to see how the public reacts. It is going to be a balancing act for these banks. Balancing how many foreclosure complaints they can file before their brand value takes a hit.
Ugly stuff, but that is how the banking system works.
The mortgage servicers that service federally backed mortgage loans, Freddie Mac, Fannie Mae, Ginnie Mae, FHA, VA … these are the only loans that are subject to the FHA moratorium. They cannot start foreclosure filings until the government releases the hold.
When is that going to be?
It won’t be before January 31, 2021, but beyond that I have absolutely not a blessed clue.
But as soon as I hear anything, I will let you know, so watch this space!
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