We are a large servicer with three regional offices. I am the compliance manager for one of those offices. Our Chief Compliance Officer reads your weekly FAQs, as do I and the compliance staff in all our offices
Our CARES policy has gone through several iterations. We want to provide a brief outline of two real estate categories that are given relief under CARES. This outline will be in our policy’s first section and will also be given to our operations personnel.
What types of relief are available for the two categories of one-to-four family real estate and multifamily real estate?
We also want to know what relief protections are available for renters in multifamily real estate?
Thank you for your question! I appreciate your continuing interest in our weekly FAQs.
The Coronavirus Aid Relief and Economic Security Act (CARES Act) contains several provisions that address mortgage and rental relief. I will provide a brief outline here regarding the relief available. But I suggest you consider my outline in tandem with, among other things, the provisions in sections 1024.39 through 1024.41 of RESPA (Real Estate Settlement Procedures Act).
First, I will offer an outline of the type of relief available, depending on the type of property involved. Second, I will address your question about renter protection.
One-to-Four Family Real Estate
Section 4022 (Foreclosure Moratorium and Consumer Right to Request Forbearance) of the CARES Act grants forbearance rights and protection against foreclosure to borrowers with a federally backed mortgage loan.
Thus, for this purpose, a federally backed mortgage loan is any loan that:
- Is secured by a first or subordinate lien on residential real property (including individual units of condominiums and cooperatives) designed principally for the occupancy of from one to four families.
- Is federally owned or otherwise backed by one of the following federal agencies and entities:
- U.S. Department of Housing and Urban Development (HUD);
- U. S. Department of Agriculture (USDA);
- USDA Direct;
- USDA Guaranteed;
- Federal Housing Administration (FHA);
- U.S. Department of Veterans Affairs (VA);
- Fannie Mae; and
- Freddie Mac.
Borrowers with a federally backed mortgage loan, who are experiencing financial hardship due, directly or indirectly, to the COVID-19 emergency may request a forbearance on their loan, regardless of delinquency status, by submitting a request (viz., an attestation) to their servicer. They must explicitly affirm that they are experiencing financial hardship during the COVID-19 emergency.
Upon receiving a request for forbearance, a servicer must provide forbearance for up to 180 days, with no additional documentation required, other than the borrower’s attestation to a financial hardship caused by the COVID-19 emergency. Importantly, no fees, penalties, or interest (beyond the amounts scheduled or calculated as if the borrower made all contractual payments on time and in full under the terms of the mortgage contract) may be charged to the borrower in connection the loan.
At the request of the borrower, the forbearance period may be extended for up to an additional 180 days, provided that the borrower’s request is made during the covered period. The initial or extended period may also be shortened at the borrower’s request.
Excluding vacant or abandoned properties, a servicer of a federally backed mortgage loan may not initiate any judicial or nonjudicial foreclosure process, move for a foreclosure judgment or order of sale, or execute a foreclosure-related eviction or foreclosure sale for 60 days beginning on March 18, 2020.
Multifamily Real Estate
Loans secured by multifamily property are addressed in section 4023 of the CARES Act. These provisions apply to federally backed multifamily mortgage loans, including any loan (other than temporary financing, such as a construction loan) that:
- Is secured by a first or subordinate lien on residential multifamily real property designed principally for the occupancy of five or more families; and,
- 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 administrated by HUD, or is purchased or securitized by Fannie Mae or Freddie Mac.
Multifamily borrowers with a federally backed multifamily mortgage loan experiencing financial hardship due, directly or indirectly, to the COVID-19 emergency may request forbearance. The loan must have been current on its payments as of February 1, 2020. The request for relief must be submitted to the borrower’s servicer. Such a request may be verbal or written. The borrower can discontinue forbearance at any time.
Upon receipt of an oral or written request, the servicer must:
- Document the hardship.
- Provide forbearance for up to 30 days.
- Extend forbearance for up to 2 additional periods of 30-days each, provided that such request is (1) made during the covered period (viz., the covered period begins upon enactment (March 27, 2020) and ends on December 31, 2020, or, if sooner, the termination date of the COVID-19 national emergency as declared by the president); and (2) made at least 15 days prior to the end of the original 30-day period.
For the duration of the forbearance, a multifamily borrower receiving forbearance may not:
- Evict or initiate the eviction of a tenant from a dwelling unit within the applicable property solely for nonpayment of rent or other fees;
- Charge late fees, penalties, or other charges to such tenant on account of the late payment of rent; and
- Require a tenant to vacate a dwelling unit on the applicable property based on fewer than 30 days’ notice (and such notice may not be issued during the forbearance period).
I would also note that a related provision of the CARES Act operates to provide a temporary moratorium on eviction in certain properties, including those that have a federally backed multifamily mortgage loan. Under this provision, during the 120-day period beginning on March 27, 2020, the lessor may not:
- File any action to recover possession of the covered dwelling on account of nonpayment of rent or other fees or charges.
- Charge a tenant for fees, penalties, or other charges related to nonpayment of rent.
Also, the lessor may not require a tenant to vacate a dwelling unit based on fewer than 30 days’ notice, and such notice may not be issued during the 120-day period. Note, also, that the moratorium imposed by this provision applies irrespective of whether the borrower has sought or is granted forbearance relief as discussed above.
Jonathan Foxx, Ph.D., MBA
Chairman & Managing Director
Lenders Compliance Group