If you’re a tenant or a homeowner struggling to make monthly housing payments due to the impact of the pandemic and lockdowns, we feel for you. You’ve been through a lot. And now you’re wondering how much time you have left to take control of your finances before losing your home. That’s a scary situation—but we can help!
Maybe you’re on the other end of things as a landlord and are wondering how many more months you’ll go without collecting income from your rental property—which is putting a painful dent in your wealth-building goals. We know that’s a tough place to be.
Whichever side you’re on, it’ll help to know the latest news on the eviction moratorium and foreclosure moratorium. Wait, what? Yeah, these terms sound pretty complicated. But don’t worry. You’ve come to the right place! We’ll help you figure out what these terms mean for your situation and what you can do about them.
Let’s get started!
What Is a Moratorium?
First, a moratorium is a fancy word for a temporary ban on evictions and foreclosures—which would otherwise remove renters and homeowners from their homes for not making payments they owe (rent or mortgage).
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In other words, if the pandemic has harmed your ability to make housing payments, then you might be protected by the moratorium to stay in your home for a period of time—despite missed payments. This gives you time to catch up on payments and avoid the devastating loss of your home.
What Renters Should Know
Since the outset of the pandemic, federal housing relief efforts like the eviction moratorium were set up to protect renters. This kept renters from losing their homes if they lost a job or income or had devastating medical expenses due to circumstances related to COVID-19.
When Does the Eviction Moratorium Expire?
The eviction moratorium was set to end in 2020, but has since been extended again and again by the Centers for Disease Control and Prevention (CDC)—with the latest expiration date set for June 30, 2021.1
However, a federal judge ruled that the CDC was overstepping its authority in extending the moratorium and declared the order invalid as of May 2021. The judge’s ruling is currently under appeal and being challenged by other officials, so it’s still a little unclear what will happen next.2
Federal vs. State and Local Evictions
An important thing to remember here is that whatever happens with the CDC’s moratorium is at the federal level. But that doesn’t necessarily change the status of an eviction moratorium that may have been set up by your state or local government. So be sure to check with your local officials to know where you stand.
Who’s Covered Under the Eviction Moratorium?
The CDC’s eviction moratorium only covers those who can’t keep up with rent, don’t have other housing options and earn no more than $99,000 annually (or $198,000 for couples)—among other qualifications.3 Keep in mind, eviction protection isn’t automatic—to be covered, you’d have to fill out a CDC declaration, which can be found online, and send it to your landlord.4
Also, the eviction moratorium doesn’t protect you if your rental agreement expires and your lease is up. Same goes for if you damage the property or violate the terms of your rental agreement in any way.
Remember, eventually you’ll still owe back the rent you missed. A moratorium only means back payments are on hold without penalty. A ban on evictions can’t last forever, so keep working hard to get caught up on your payments.
How to Avoid Eviction Going Forward
For help avoiding the risk of eviction in the future, make sure you know how much rent you can actually afford. We recommend never renting a place that costs you more than 25% of your monthly take-home pay. You’ll also want a full emergency fund of three to six months of expenses to protect yourself when life hits you with the unexpected.
If you’re suffering from financial hardship during this season, don’t give up hope. There is a way you can take control of your money for good. Get the best content and tools and a plan that’ll help you turn small wins into real results. Try Ramsey+ for free today.
What Landlords Should Know
Again, the eviction moratorium is still up in the air at the federal level. But your state or local government might have its own ban on evictions in place until a certain date. So be sure to contact your local government to know your rights as a landlord.
You’ve probably worked hard to be understanding to tenants who are facing hardships during this season. But if you’re a landlord who hasn’t been able to collect rent for over a year, you might be feeling the financial strain that comes from a loss of income. In that case, it might be time to look for other options.
Keep in mind that the eviction moratorium only applies to tenants who are facing hardship related to the pandemic—it doesn’t protect tenants who violate the terms of your leasing contract for just any reason. Also, if your tenant’s lease is up, you probably aren’t obligated to continue their contract for another term.
On the other hand, there might be options for your tenant to apply for housing relief so that they receive funds to be able to continue paying rent if approved.
In the end, if your finances get hit too hard waiting for the moratorium to end, you might opt to sell your rental property. Of course, it’s likely that the terms of your tenant’s contract will need to be held by your buyer. And that could make the property difficult to sell. But if you find an excellent real estate agent, they should be able to help you locate the right buyer.
What Homeowners Should Know
Okay, like the eviction moratorium, the foreclosure moratorium or mortgage moratorium protects homeowners from losing their house if they can’t make mortgage payments for reasons related to the pandemic. However, the foreclosure moratorium wasn’t ordered by the CDC. Instead, it was set by government-sponsored mortgage programs.
You may also be able to enroll in a mortgage forbearance agreement. What is mortgage forbearance? It’s a deal between you and your lender to give you a period of time to catch up on payments and avoid penalties by pausing or reducing your mortgage payments.
When Does the Foreclosure Moratorium Expire?
The foreclosure moratorium and mortgage forbearance enrollment provided by government-backed mortgage programs is set to expire on June 30, 2021.5 Much like the eviction moratorium, the foreclosure moratorium continues to get extended. Either way, seeing July as the expiration date will keep you from being caught off guard by a foreclosure notice from your lender in case this is the final extension.
Who’s Covered Under the Foreclosure Moratorium?
The foreclosure moratorium applies to only federally backed mortgage program providers like Fannie Mae, Freddie Mac, HUD/FHA, VA and USDA.6 So if your mortgage is one of these, you’re probably covered. But even if you have a private loan through a local bank, you might still be covered by a foreclosure moratorium at the state or local level.
To be covered under the foreclosure moratorium or to request or extend your forbearance period, contact your mortgage service provider.7
Avoid Foreclosure by Doing a Short Sale
When the moratorium does eventually run out, another option you have to avoid foreclosure is to do a short sale. A short sale is when your lender is willing to accept less money for your home than the amount still owed on your mortgage.
Doing a short sale is less damaging to your financial standing than a foreclosure. Plus, it might be easier to convince your lender to do a short sale because it helps them avoid the costly legal process of a foreclosure and still gain back as much of the original loan as possible.
How to Avoid Mortgages You Can’t Afford
For tips on going forward, never get a mortgage with a payment that’s more than 25% of your monthly take-home pay. That limit includes principal, interest, property taxes, homeowner’s insurance, private mortgage insurance (PMI)—and don’t forget to take homeowners association (HOA) fees into consideration. Use our mortgage calculator to enter your down payment amount and try out different home prices within your budget.
Need to Sell Your House or Rental Property?
Maybe you’re a landlord who is struggling with a loss of rental income and can’t afford to continue waiting on the moratorium to end. Or maybe you’re a homeowner with a mortgage that’s crippling your finances and you need to sell the house before it’s too late. An expert real estate agent will help you make the best selling decisions and find you the right buyers.
For a quick and easy way to find an agent we trust, try our Endorsed Local Providers (ELP) program. We only recommend agents who share your values and are the best in your market.