On March 27, 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) which provides widespread relief to individuals, businesses, and governmental entities affected by the national emergency declared by President Trump on March 13, 2020, concerning the novel coronavirus disease outbreak (the “COVID-19 emergency”). Under the CARES Act, financial relief is available to borrowers with federally backed mortgages, federally backed multifamily mortgages, and their tenants.
Financial Relief to Borrowers with Federally Backed 1-4 Family Mortgages. Section 4022 of the CARES Act provides that a borrower with a federally backed mortgage loan who is experiencing financial hardship due, directly or indirectly, to the COVID-19 emergency may request forbearance on the federally backed mortgage loan, regardless of delinquency status by (a) submitting a request for forbearance to the borrower’s servicer; and (b) affirming that the borrower is experiencing financial hardship due to the COVID-19 emergency. No additional information or documentation is required to receive the forbearance.
Forbearance shall be granted for up to 180 days and shall be extended for an additional period of up to 180 days at the request of the borrower. During the forbearance period under Section 4022, no fees, penalties, or interest (beyond amounts scheduled or calculated under the terms of the mortgage), shall accrue on the borrower’s account.
A “federally backed mortgage loan” is defined in the CARES Act as a loan that is secured by a mortgage lien on residential real property designed principally for the occupancy of 1-4 families that is (a) insured by the Federal Housing Authority under Title II or Section 255 of the National Housing Act; (b) guaranteed under Section 184 or 184A of the Housing and Community Development Act of 1992; (c) guaranteed or insured by the Department of Veterans Affairs or the Department of Agriculture; (d) made by the Department of Agriculture; or (e) purchased or securitized by Fannie Mae or Freddie Mac.
Section 4022 also provides that a servicer of a federally backed mortgage loan may not initiate any judicial or non-judicial foreclosure process, move for a foreclosure judgment or order of sale, or execute a foreclosure-related eviction or foreclosure sale until May 17, 2020.
Financial Relief to Borrowers with Federally Backed Multifamily Mortgages. Section 4023 of the CARES Act provides that a borrower with a federally backed multifamily mortgage loan, who is experiencing financial hardship due to the COVID-19 emergency, may request a forbearance on the federally backed multifamily mortgage loan as long the loan was current as of February 1, 2020. This request for forbearance may be made orally or in writing to the borrower’s servicer, along with an affirmation that the borrower is experiencing financial hardship due to the COVID-19 emergency.
Upon request, a borrower shall receive the forbearance for up to 30 days, which may be extended for two additional 30-day periods upon the borrower’s request as long as the request for an extension is made at least 15 days prior to the end of the forbearance period.
Unlike Section 4022, which does not impose any renter protections during the forbearance period, Section 4023 provides that the borrower may not, during the forbearance period (a) evict or initiate the eviction of a tenant solely for nonpayment of rent or other fees or charges; or (b) charge any late fees, penalties, or other charges to a tenant for late payment of rent. Further, the borrower may not issue a notice to vacate until after the expiration of the forbearance period and may not require a tenant to vacate until at least 30 days after the notice is given.
Under the CARES Act, a “federally backed multifamily mortgage loan” is defined as a loan (other than temporary financing such as a construction loan) that (a) is secured by a lien on residential multifamily real property designed principally for the occupancy of 5 or more families; and (b) is made in whole or in part, or insured, guaranteed, supplemented, or assisted in any way, by any officer or agency of the Federal Government, or under or in connection with a housing or urban development program administered by the Secretary of Housing and Urban Development, or a housing or related program administered by any other such officer or agency, or is purchased or securitized by Fannie Mae or Freddie Mac.
A forbearance under Section 4023 may be requested any time from March 27, 2020, until the earlier to occur of (a) the termination date of the COVID-19 emergency; and (b) December 31, 2020.
Tenant Protections. In addition to the above-referenced tenant protections that apply to any borrower with a federally backed multifamily mortgage loan who requests a forbearance under Section 4023, Section 4024 of the CARES Act also imposes a 120-day moratorium, until July 25, 2020, on (a) the filing of any action or proceeding to recover possession of a dwelling for nonpayment of rent or other fees or charges; and (b) the charging of any fees, penalties, or other charges to a tenant related to such nonpayment of rent.
In addition, landlords may not issue a notice to vacate until after the expiration of the 120-day moratorium and a tenant may not be required to vacate until at least 30 days after the issuance of the notice to vacate.
Section 4024 applies to all properties (a) subject to a federally backed mortgage loan or a federally backed multifamily mortgage loan; or (b) that participate in a covered housing program as defined in 34 U.S.C. 12491(a) or participate in the rural housing voucher program under 42 U.S.C. 1490r.
If you would like more information on financial relief for borrowers with federally backed mortgages, federally backed multifamily mortgages, and their tenants, please contact a member of our Corporate and Real Estate practice groups:
John A. Anderson