COVID-19 Moratorium on Foreclosures: A Look at the Impact on the Court System


As the coronavirus pandemic continues to worsen and spread economic turmoil across the U.S., the impact on the housing market has been dramatic. Millions of Americans continue to be out of work, and those figures could increase as the infection rate in many states keeps climbing.

The government has stepped in and placed a moratorium on foreclosures. What are those provisions, and what will this look like in the court system going forward?

Federal and State COVID-19 Mortgage Relief Programs

By July 1, there were more than 2.7 million cases of COVID-19 in the U.S., accounting for over 130,000 deaths. Federal and state governments stepped up in April to provide protection for homeowners and renters, many of whom remain out of work thanks to business closures.

The orders are temporary and are either tied to stay-at-home periods or are related to judicial orders that suspend nonemergency civil cases such as foreclosures. The Consumer Financial Protection Bureau (CFPB) recommends that homeowners pay their mortgage if they can and contact their mortgage servicer immediately if they can’t. If a private lender offers a mortgage payment deferral or forbearance options, borrowers should understand the terms of that agreement.

Under the provisions of the CARES Act, borrowers with federally-backed mortgages (Freddie Mac, Fannie Mae, FHA, VA, USDA) can request forbearance for 180 days with an option to extend for another 180 days. All 50 states and the District of Columbia have also implemented COVID-19 relief for homeowners, but these are state-specific and subject to change.


The Court System and the Moratorium on Foreclosures

Just because there have been federal and state actions to limit foreclosures, that doesn’t necessarily mean that some will not still get processed as COVID-19 continues. Press coverage might give the impression that court orders and various provisions prevent a wider range of actions than they do.

For instance, certain states have barred evictions post-foreclosure, but those orders haven’t halted the actions of a foreclosure sale itself. In a judicial foreclosure, orders might prevent a foreclosure sale and subsequent eviction. Still, those same orders might not stop the running of deadlines to answer pleadings or respond to motions.

According to JD Supra, some of the ways that the COVID-19 pandemic has impacted foreclosure and receiver issues with the courts include:

  • In court-based foreclosure processes, there will continue to be delays with existing and new cases, as well as issues getting a judge assigned.
  • Courts will likely continue to be unwilling to entertain requests for receivers except in cases deemed an emergency.
  • Federal judges have been more responsive to emergency requests for relief than state judges.
  • Court closures may preclude or limit the ability of title companies to search physical records, resulting in further delays of foreclosure proceedings.

How foreclosures will be handled in the coming months remains a fluid situation. Courts will remain backlogged, and some jurisdictions might continue to change policies with respect to these matters as the situation with the pandemic continues to develop.