Suspension of Bank Foreclosures during the COVID-19 Public Health Emergency

By: Jon Wolseth

The economic and social uncertainty caused by the COVID-19 pandemic exacerbates the situation of homeowners already finding themselves in straitened financial circumstances.  For those households in the midst of foreclosure proceedings, the fear of losing one’s home during the public health crisis compounds an already difficult situation.  Recent steps have been taken at the state and federal levels to provide homeowners in the midst of foreclosure with some relief.  

Bank foreclosure proceedings are being suspended in Iowa, an action taken in a recent (March 22, 2020) State Public Health Emergency Declaration from Governor Reynolds.  Section 2 of the declaration reads: 

SUSPENSION OF FORECLOSURES

SECTION TWO.  Pursuant to Iowa Code §§ 29C.6(6) and 135.144(3), and in conjunction with the Iowa Department of Public Health, I temporarily suspend the regulatory provisions of Iowa Code chapters 646, 654, 655A, and 656 allowing for the commencement of foreclosure proceedings, or the prosecution of ongoing foreclosure proceedings, on residential, commercial, and agricultural real property located in the state of Iowa. Suspension of these provisions shall apply during the duration of this Proclamation or any future extension of this suspension.

A.   Nothing in this section shall be construed as relieving any individual of their obligation to make mortgage payments, or to comply with any other obligation that an individual may have under a mortgage.

B. The Iowa Division of Banking and the Iowa Division of Credit Unions are hereby directed to immediately engage with banks, credit unions, mortgage bankers, and mortgage services to identify any tools, means, or methods that could be used to relieve Iowans from the threat of foreclosure.

In particular, this action provides relief for homeowners who may have been at risk of foreclosure in the midst of the public health emergency.  Affected homeowners are encouraged to proactively reach out to their mortgage lenders to pause proceedings.  

At the federal level, the U.S. Department of Housing and Urban Development announced a 60-day moratorium on foreclosures and evictions for FHA-insured single family homeowners. The moratorium began March 18, 2020. Read the full text of the press release

U.S. Government-sponsored mortgage enterprises Fannie Mae and Freddie Mac have also released plans of assistance for their lendees whose ability to make mortgage payments is impacted by the COVID-19.

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