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CARES Act- Forbearance on Federally-Backed Mortgages (Including Multifamily) and Eviction Moratorium

Legal brief
In response to the pandemic, the CARES Act was signed into law on March 27, 2020. Among other things, the Act:
 
  • Provides loan payment forbearance of up to 90 days for multifamily borrowers (5 units or more) with federally-backed mortgage loans.
  • Provides loan payment forbearance of up to 360 days for residential borrowers (4 units or less) with federally-backed mortgage loans.
  • Imposes a 120-day moratorium on most new legal proceedings to evict tenants from properties currently financed with federally-backed mortgages.
Each of these provisions is discussed in more detail below.
 
Forbearance for Multifamily Borrowers (5 Units or More) With Federally-Backed Mortgage Loans
 
If you are a borrower under a multifamily mortgage loan (5 units or more) that is federally-backed, you may request emergency forbearance as follows:
 
Eligibility.
 
  • Eligible loans include loans purchased, insured or assisted by Fannie Mae, Freddie Mac or HUD.
  • The borrower must be current on its payments as of February 1, 2020.
  • The borrower is experiencing financial hardship due, directly or indirectly, to the pandemic.
Financial Hardship. The CARES Act does not define “financial hardship” or state whether any documentation (including income verification) is required to be provided by the borrower. At this time, it is not clear whether the servicer is able to exercise any discretion whether to grant the forbearance.
 
Forbearance. Forbearance will be for an initial period of 30 days with up to two additional 30-day periods. Requests for an extension must be made 15 days prior to the end of the current 30-day forbearance period.
 
No Evictions During Forbearance. During the forbearance period, the borrower may neither evict tenants (or initiate eviction proceedings) for nonpayment of rent nor charge any late fees. Note, even if a borrower does not apply for forbearance, a borrower under a multifamily mortgage that is federally-backed is still subject to the moratorium on commencing eviction legal proceedings discussed below under Moratorium on Evictions.
 
How to Apply. Contact your loan servicer. The request can be made orally or in writing, but we strongly advise that you keep a written record of your communications, such as email confirmations from your servicer that your servicer has received your request and that the forbearance is effective. Again, please remember the two available 30-day extensions require at least 15 days’ notice prior to the end of the then-effective 30-day forbearance period.
 
Forbearance for Residential Borrowers (4 Units or Fewer) With Federally-Backed Mortgage Loans
 
If you are a borrower under a residential mortgage loan (4 units or fewer) that is federally-backed, you may request emergency forbearance as follows:
 
Eligibility.
 
  • Eligible loans include those purchased by Fannie Mae and Freddie Mac, insured by HUD, VA, or USDA, or directly made by USDA.
  • The borrower is experiencing financial hardship due, directly or indirectly, to the pandemic.
  • The borrower is eligible regardless of whether the borrower is current on payments.
Financial Hardship. As stated above, the CARES Act does not define “financial hardship” or state whether any documentation (including income verification) is required to be provided by the borrower. At this time, it is not clear whether the servicer is able to exercise any discretion whether to grant the forbearance.
 
Forbearance. Forbearance will be for an initial period of 180 days and may be extended for another 180 days at the request of the borrower.
 
How to Apply. Contact your loan servicer. The Act does not specify whether the request must be in writing or if it can be oral, but we strongly advise that you keep a written record of your communications, such as email confirmations from your servicer that your servicer has received your request and that the forbearance is effective.
 

Moratorium on Evictions

A borrower under a federally-backed mortgage loan may not commence any legal proceeding to evict tenants for non-payment of rent (or charge late fees) from the mortgaged property for the 120-day period beginning on March 27, 2020 (until July 25, 2020). A federally-backed mortgage loan includes a mortgage that is insured, guaranteed, supplemented, protected, or assisted in any way by HUD, Fannie Mae, Freddie Mac, the rural housing voucher program, or the Violence Against Women Act of 1994.
 
In addition to the CARES Act, even if your loans are not federally-backed, many counties and municipalities have enacted their own foreclosure and eviction moratoriums.
 
The attorneys at Gozdecki, Del Giudice, Americus, Farkas & Brocato LLP are available to answer your questions and help you obtain relief.
 
Please note that information contained in this news alert is not and should not be construed as legal advice or opinion nor does this news alert create an attorney-client relationship.