Homework as an essential component of the academic process supports teaching and learning by consolidating what the students learn in class and promoting their study skills and self-paced work capacities. While homework characteristics and its efficacy are reported to be interrelated, there is a lacuna in the research on the effectiveness of homework policy in learning outcomes in online classes, particularly under adverse conditions. As a result, the current study investigated the effects of homework policy (leniency vs. strictness) on EFL learners literacy (reading and writing) development, focusing on their academic self-regulation (ASR) level in a distance learning course amid the COVID-19 pandemic. Data were gathered from 36 K-10 students organized into homework packet and homework leniency groups. Their literacy skills and ASR were assessed before and after the study. Due to schools closure during the COVID-19 pandemic, both groups participated in distance learning courses delivered via the national mobile-based LMS. The results of the two-way Analysis of Variance primarily revealed a significant development in the reading and writing skills of the homework-packet group. Despite the marginal difference between the reading performance of high and low self-regulated participants of both homework conditions at the end of the study, a significant difference in the development of the writing skills of high self-regulated participants of the homework-packet condition was observed. The critical role of homework strictness in online courses and promoting learners' self-regulation skills to benefit from the assigned homework, particularly in teaching writing, is underscored.