Servicers Followed the COVID-19 Foreclosure Moratorium Requirements but Could Have Better Communicated the Requirements to Borrowers

Servicers followed the COVID-19 pandemic foreclosure moratorium requirements. However, they could have better communicated the moratorium requirements to delinquent borrowers who were subject to foreclosure proceedings. This situation occurred because HUD did not require servicers to notify borrowers directly about the foreclosure moratorium and that occupancy would pause the foreclosure process. Borrowers who were not informed about the moratorium or impacts of vacancy could have abandoned their homes, not realizing that remaining in the home would have afforded them additional time to explore retention options or sell the home to recoup equity. Borrowers who were not informed about the moratorium or impacts of vacancy could have abandoned their homes, not realizing that remaining in the home would have afforded them additional time to explore retention options or sell the home to recoup equity. Servicers missed an opportunity to inform as many as 25 of 88 sampled borrowers who vacated their homes during the moratorium that remaining in their homes protected them from foreclosure. We recommend that HUD (1) update Handbook 4000.1 to require servicers to share information regarding foreclosure moratoriums with borrowers; (2) simplify the process for accessing its FAQs on its website, including adding a clickable link on its Single Family website home page that will take borrowers directly to the FAQs; and (3) review the two loans in our sample that did not receive appropriate servicing and take administrative actions if appropriate. Prior to issuing the final report, HUD took steps to address the second recommendation. We verified that a link is now available that will take users directly to the FHA Resource Center’s FAQ site. Therefore, we consider this recommendation resolved, and we will close it once the final report is issued.