By: Joel G. Kinney
April 6, 2020
The Coronavirus Aid, Relief and Economic Security Act, or CARES Act, was signed into law on March 27, 2020 and includes three provisions addressing emergency relief for borrowers of Federally backed mortgages and any tenants in properties that are subject to those mortgages. These protections include: (i) the right of borrowers to request a forbearance on loan payments, (ii) a moratorium on foreclosures, and (iii) certain tenant protections from eviction. These provisions are found in Sections 4022-4024 of the CARES Act, and are summarized below.
Borrowers’ Right to Request Forbearance
The CARES Act provides for forbearance periods of Federally backed mortgage loans and Federally backed multifamily mortgage loans. The CARES Act specifies which Federally backed loans are covered in each case, but in both cases these are generally mortgages which are serviced by or backed by one of the Federal agencies such as Fannie Mae and Freddie Mac.
Owners of 1-4 Family Properties with a Federally Backed Mortgage Loan
Covered borrowers of 1-4 family properties, including single-family homes, condominiums and cooperatives, experiencing financial hardship between February 15, 2020 and June 30, 2020 because of COVID-19 emergency, may request forbearance regardless of delinquency status. To receive a forbearance the borrower simply needs to submit a request to the lender or servicer. The request grants borrowers a forbearance for up to 180 days with the possibility of an additional 180 days extended period. During a period of forbearance, no additional fees, penalties, or interest will accrue other than the amounts that are scheduled, just as if the borrower had continued to make regular mortgage payments. As long as the borrower’s request for an extension is made between February 15, 2020 and June 30, 2020, the servicer must allow the forbearance for up to 180 days. The only documentation required is the borrower’s attestation to a financial hardship caused by the COVID-19 emergency.
Owners of Multifamily Properties with a Federally Backed Mortgage Loan
Borrowers of multifamily properties (buildings with more than 4 units) who are otherwise current on payments as of February 1, 2020, may also request a forbearance by request to the borrower’s servicer if experiencing a financial hardship due, directly or indirectly, to the COVID-19 emergency. Upon receipt of an oral or written request for forbearance, a servicer shall document the hardship and provide a forbearance for up to 30 days. This may be extended for up to two additional 30 day periods upon borrower’s request made within 15 days from the end of the forbearance period. A multifamily borrower has the option to discontinue the forbearance at any time.
The CARES Act also provides that a servicer of a Federally backed mortgage loan may not initiate foreclosure proceedings against 1-4 family properties that are subject to a Federally backed mortgage loan before May 18, 2020. This foreclosure moratorium does not apply to vacant or abandoned properties or to multifamily properties (properties with more than 4 units).
Tenant Protections Under the Act
The CARES Act also provides protections for renters where the landlord receives forbearance under a Federally backed mortgage loan. As part of the consideration for receiving such a forbearance, a multifamily borrower will not be allowed to evict or initiate the eviction of a tenant solely for nonpayment of rent, and will also not be allowed to charge any late fees, penalties, or other charges to a tenant during the forbearance period. Additionally, a multifamily borrower that receives a forbearance may not require a tenant to vacate a dwelling unit except upon 30 days’ notice and such notice may not be given until 30 days after the end of the forbearance period. This is a significant protection in jurisdictions where, by statute, the notice period is much shorter.
The CARES Act also provides a moratorium on eviction filings for those living in a property that is part of certain Federal programs – such as housing provided under the Violence Against Women Act of 1994 (34 U.S.C. 1249l(a)), or under a rural housing voucher provided through the Housing Act of 1949 (42 U.S.C. 1490) – or that is subject to a Federally backed mortgage or multifamily mortgage loan. In these cases, a landlord may not file for eviction or charge fees, penalties, or other charges to the tenant related to such nonpayment of rent for 120 days. Further, a landlord must give a tenant a 30 day notice before requiring a tenant to vacate, and may not issue a notice to vacate until after the 120 period.
It is important to note that the provisions of the CARES Act only apply to borrowers of Federally backed mortgage or multifamily loans and their tenants. It is especially important for landlords and tenants to understand whether their properties are covered under the Act. Consumers may check if their residential mortgage has been purchased by one of these agencies by going to https://ww3.freddiemac.com/loanlookup/ or https://www.knowyouroptions.com/loanlookup