Alerts and Updates

Mortgage and Other Real Property Relief Under the CARES Act

April 7, 2020

CESA has mandatory forbearance provisions that apply to loans on single and multifamily residential property with federally backed mortgages.

The Coronavirus Economic Stabilization Act (CESA, under Title IV of the CARES Act) puts in place a foreclosure moratorium for certain residential properties (including individual units of condominiums and cooperatives), and an eviction moratorium for tenants of certain “covered property” (predominantly multifamily housing units). The foreclosure moratorium applies to foreclosures of single family residential real property (designed for occupancy by one to four families) subject to federally backed mortgage loans (prohibiting loan servicers from initiating foreclosure actions). The eviction moratorium applies to lessor eviction actions based on nonpayment of rent or other fees and charges from single family and multifamily properties that (i) participate in certain federal housing voucher programs, (ii) have a loan that was made or guaranteed a federal program, or (iii) were purchased or securitized by Fannie Mae or Freddie Mac (collectively, “Covered Property”) (prohibiting lessors from intiating eviction actions). In addition to the imposition of the above noted moratoria, CESA has mandatory forbearance provisions that apply to loans on single and multifamily residential property with federally backed mortgages.

Single Family Homes

CESA permits a borrower under a federally backed single family residential mortgage loan (a loan secured by a lien on single family residential real property that is made, guaranteed or insured under a federal program or purchased or securitized by Fannie Mae or Freddie Mac) to request a forbearance under such loan. The borrower must be experiencing financial hardship as a result, directly or indirectly, of the COVID-19 national emergency. The forbearance request may be made by the borrower at any time during the pendency of the COVID-19 national emergency, but in any event, no later than December 31, 2020. A borrower’s prior or current delinquency on such loan has no effect on the borrower’s right to request a forbearance.

Once requested by a borrower, a forbearance must be granted by a loan servicer, without any requirement of documentation of borrower hardship, for an initial period of 180 days (with an additional 180-day extension, if requested by the borrower). No fees, penalties or additional interest may accrue during the granted forbearance period.

Further, as noted above, loan servicers are prohibited from initiating any foreclosure action on nonvacant, single family residential property with a federally backed mortgage. This moratorium took effect as of March 18, 2020, and extends for at least 60 days thereafter.

Multifamily Property

CESA permits a borrower under a federally backed multifamily loan (a loan secured by a lien on a residential multifamily property of five or more units, made or guaranteed under a federal program or purchased or securitized by Fannie Mae or Freddie Mac) to request a forbearance on such loan. The borrower must be experiencing financial hardship as a result, directly or indirectly, of the COVID-19 national emergency, but was current on its payments as of February 1, 2020. The forbearance request may be made by the borrower, in writing or orally, to the loan servicer at any time during the pendency of the COVID-19 national emergency, but in any event, no later than December 31, 2020.

Once requested, following the loan servicer’s documentation of the borrower hardship, a forbearance must be granted for an initial period of 30 days, with two additional 30 day extensions if requested by the borrower. Requests for forbearance extensions must be made during the pendency of the COVID-19 national emergency, but no later than December 31, 2020, and at least 15 days prior to the end of a then-existing forbearance period.

During the period of forbearance, the requesting borrower may not evict any of its tenants (in the building to which the forbearance relates) solely for nonpayment of rent or other fees and charges, and also may not charge any late fee, penalties or other charges to such tenants. In addition, during such period, the requesting borrower may not require any tenant to vacate a unit (in the building to which the forbearance relates) without 30 days’ notice, which may not be issued until the conclusion of the forbearance period.

General Eviction and Fee Moratorium

As noted above, CESA contains a general moratorium on evictions based on nonpayment of rent or other fees and charges from dwellings in any Covered Property. The moratorium lasts for 120 days following the CARES Act’s enactment date (March 27, 2020). During the moratorium period, a lessor may not initiate eviction action for the nonpayment of rent with respect to a tenant of a dwelling in a Covered Property. In addition, such lessor may not charge any late fee, penalties or other charges with respect to the tenant’s nonpayment of rent or other charges or fees. Finally, during such moratorium period, a lessor may not require any tenant to vacate a dwelling in a Covered Property without 30 days’ notice, which may not be issued until the conclusion of the moratorium period.

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