Helping You Think More Clearly About Your Future

     The American Rescue Plan Act of 2021 made $10 billion available to states, the District of Columbia, U.S. territories, and tribal entities to provide mortgage assistance to borrowers impacted by the COVID-19 pandemic. State agencies distribute funds available under this program pursuant to plans approved by the Treasury Department. Congress allocated the funds “for the purpose of preventing homeowner mortgage delinquencies, defaults, foreclosures, loss of utilities or home energy services, and displacement of homeowners experiencing financial hardship after January 31, 2021.” The funds can thus be used, among other purposes, to cover payments for principal and interest that were forborne or otherwise not paid due to effects of the COVID-19 pandemic.

The Treasury Department established general guidelines for the HAF program while allowing states some flexibility in the formulation of their own programs. The Treasury guidance established general income eligibility guidelines, stated in general how funds may be used, and defined a “hardship” eligibility standard. The text of each state’s HAF plan is available at a Treasury Department website. States also maintain their own websites with information about application procedures and options for the use of available funds. The state agency responsible for implementing HAF varies from state to state, and the states often adopted a state-specific name for their HAF program.

ELIGIBILITY REQUIREMENTS

HAF funds must be used by September 30, 2025. The funds are targeted at low- and moderate-income homeowners based on area median income. State programs release the funds to servicers or other third-party payees, and not directly to borrowers. To be eligible a borrower must have experienced a COVID-related hardship on or after January 21, 2020. The hardship can include one that began before January 21, 2020, and continued after that date due to the pandemic. The hardship could include job loss, reduction in income, reduction in hours worked, increased health care costs, increased costs due to the need to care for family members, or other issues which have impacted the household’s income. 

As a practical matter, the availability of HAF funds may depend on the borrower’s jurisdiction and individual circumstances. Several state programs reached capacity soon after opening for applications, while others had to temporarily close applications and implement wait lists due to the volume of applications. As of December 31, 2023, many state programs have closed.

Terms of a state program can also impact whether a particular borrower receives HAF funds. Advocates need to be familiar with the details of a state’s program. A program may set a limit on the total amount that can be paid out for arrearages on any particular loan. Household income limits vary by state. The plans define standards for documentation of income and hardship. HAF funds can be applied to a wide range of obligations. These include: reverse mortgages, debts secured by manufactured homes, land installment contracts, condominium fees, non-escrowed tax arrearages, utilities, and lender attorney fees. Because state plans may be vague or silent on the use of HAF funds for some of these obligations, advocates may need to argue for coverage directly with plan administrators.

Borrowers should investigate the loss mitigation options outside of the HAF program that their servicer can provide. The deferral and modification options available for federally-backed mortgages may provide the most sustainable long-term options for borrowers who are eligible for them. HAF programs vary in the extent to which a borrower is required to document the exhaustion of these other loss mitigation options available from a servicer. Similarly, programs may address how HAF funds can be combined with investor-based loss mitigation options. Participation in bankruptcy should not prevent receipt of HAF funds. However, certain HAF plans attempt to restrict access for borrowers in bankruptcy.

Servicers must typically sign participation agreements with the state program, and advocates may need to verify that a servicer is currently participating. While most programs treat HAF funds entirely as grants, a few treat aspects of the payments as loans. Finally, state programs are required to include provisions to target funds for “socially disadvantaged individuals.”

PROCEEDING WITH FORECLOSURES WITH PENDING HAF APPLICATION

     You should ensure that your loan servicer refrains from proceeding with foreclosure while a borrower’s HAF application is pending. This is particularly true when the borrower is simultaneously pursuing other loss mitigation options that the servicer offers.  The GSEs (Fannie Mae and Freddie Mac) require servicers to delay foreclosure activities for up to sixty days upon notice from a HAF state agency that a borrower has applied.  

The secretaries of the Departments of Housing and Urban Development, Veterans Affairs, Agriculture, and the Treasury have issued a statement “strongly urging” servicers of federally insured mortgages to stay foreclosure proceedings when notified of a pending HAF application.  A state participation agreement can include such a requirement. State laws, court rules, and agency guidance can also create protections for borrowers during the HAF application process. HAF programs hire vendors to manage the technology required for the application process. The software typically generates a communication to a servicer when a borrower has submitted the application basics. Upon receipt of this notice, the servicer should implement a hold on foreclosure. Advocates should consider state deceptive practice (UDAP) and other state law claims when servicers proceed with foreclosure after receiving notice that an application is pending.  

As a matter of practice, our office typically sends out a letter to the client's loan servicer, alerting them of the pending application and advising them of the time scheme

[Tribal members - find program listings for tribal member at www.naihc.net/tribal-housing-assistance-resource-hub  Please contact TRG with any questions you may have today.

The Bureau of Consumer Financial Protection (CFPB) is an independent bureau within the Federal Reserve System that empowers consumers with the information they need to make financial decisions in the best interests of them and their families. The CFPB was created under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).  The purpose of the CFPB is to promote fairness and transparency for mortgages and other consumer financial products and services. To learn more about the CFPB and their consumer complaint process, please click on the link below: