FHFA extends foreclosure ban as borrower struggles persist, costs rise

Fannie Mae and Freddie Mac have extended their foreclosure and eviction moratoriums to the end of February, according to the Federal Housing Finance Agency.

The extension of the government-sponsored enterprises’ bans from Jan. 31 to Feb. 28 gives the incoming Biden administration more time in which to consider how it wants to contend with the concern.

The bans do have a price tag associated with them, adding an estimated $1.4 billion to $2 billion to the GSEs’ costs, according to the press release. In an earlier release, the FHFA estimated that implementing the bans at the start of the pandemic came with an initial cost of $6 billion.

But the FHFA noted that the moratoria have helped 4.5 million families remain in their homes. The moratoria are in force on home mortgages and properties acquired by an enterprise in foreclosure or deed-in-lieu transactions.

The bans have drawn mixed reviews from the industry.

On Tuesday, for example, data provider CoreLogic credited the more than 20-year low in the vacancy rates in single-family homes with helping to “maintain stability for rent prices despite economic challenges.”

However, Richard Kruse, a partner at foreclosure auction house Gryphon USA, warned in response to last month’s extension of the bans that they delay “inevitable pain.”

Foreclosures overall have been down year-over-year but they are rising month-over-month as those in progress before the pandemic-related bans continue. A growing backlog is a concern, according to Attom Data Solutions’ latest report.

“There is a backlog of foreclosures building up — loans that were in foreclosure prior to the moratoria, loans that would have defaulted under normal circumstances, and loans whose borrowers are in financial distress due to the pandemic,” Rick Sharga, executive vice president of Attom’s consumer-facing business, RealtyTrac, said in the report.

The Biden administration is considered more likely to allow the extension of the bans than to take any immediate action to end them.

Last week, the FHFA also extended several origination processing flexibilities — such as allowing alternative methods of appraisal and employment and income verification — to the end of February.