For all the attention the CARES Act has received recently for “Stimulus Checks” for individuals, and the “Payroll Protection Program” (PPP) for small businesses, I wanted to highlight a few areas of the CARES Act that directly affects the real estate industry and rental properties regarding rent and mortgage payments:
Mortgage Payment Forbearance
Under the CARES Act, properties and owners with federally backed multifamily mortgage loans, such as those with FHA, HUD, USDA, Fannie Mae, or Freddie Mac, are eligible for up to 90 days of forbearance on loans due to a financial hardship during the COVID-19 emergency.
In order to receive the forbearance, the borrower may NOT:
(1) issue a notice to vacate
(2) start an eviction filing, or
(3) impose fees, penalties, or other charges on residents for nonpayment of rent during the forbearance period.
To receive this forbearance protection, the property owners must have been current with the mortgage as of February 1, 2020.
Other forbearance protections apply to those with federally backed mortgage loans for properties with 1-4 units, such as those with FHA, VA, or USDA. Forbearance may be requested by affirming financial hardship directly or indirectly due to the COVID-19 emergency and the servicer may not request any other documentation. The forbearance period is 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, no fees, penalties, or interest may accrue beyond the amounts scheduled or calculated as if the borrower made all payments in accordance with the terms of the mortgage contract.
Federal Rental Housing Eviction Moratorium
In addition to the MN Governor’s Executive order to suspend evictions, the CARES Act also introduced a 120-day moratorium on evictions and late fees for “covered properties.” Beginning on March 27 (the effective date of the legislation) property owners of covered properties are prohibited from issuing eviction notices or starting eviction actions against residents for nonpayment of rent and may not charge fees or penalties related to that nonpayment of rent.
“Covered properties” are those with a “federally backed mortgage loan,” such as those that are insured, guaranteed, supplemented, protected, or assisted in any way by HUD, the Federal Housing Administration (FHA), Fannie Mae, or Freddie Mac. The number of properties subject to the national eviction moratorium is significant.
This moratorium does not apply just to those affected by the COVID-19 crisis but to all residents at a “covered property.”
Residents still owe their rent to the property owners; they just cannot be evicted for not paying it.
For more information and answers to your real estate questions, contact Larry Davidson at email@example.com