CARES ACT (PART 3): RENT, MORTGAGES AND LANDLORDS
The CARES Act (PL 116-136) contains several provisions related to rent, mortgages and landlords to attempt to protect renters, landlords, and mortgages. These protections are in the form of forbearances.
Forbearance: a temporary postponement of payments. It is a form of repayment relief granted by the lender, creditor, or landlord. In most cases, the payments will still be due at the end of term. There is little guidance in the CARES Act defining when the forbearance would come due.
Foreclosure Moratorium and Consumer Right to Request Forbearance
(Single family properties to Properties with 4 families, CARES Act, §4022)
During the covered period, a borrower with a Federally backed mortgage loan experiencing a financial hardship due, directly or indirectly, to the COVID–19 emergency shall receive a forbearance on the Federally backed mortgage loan, regardless of delinquency status
Federally backed mortgage loan: Any loan which is
designed principally for the occupancy of 1- to 4- families
secured by a first or subordinate lien on residential real property (including individual units of condominiums and cooperatives)
insured by the Federal Housing Administration under title II (Title II Loan)
insured under section 255 of NHA (Insurance of home equity conversion mortgages for elderly homeowners)
guaranteed under section 184 (Indian Housing) or 184A (Native Hawaiians) of the Housing and Community Development
guaranteed or insured by the Department of Veterans Affairs (VA Loans)
guaranteed or insured by the Department of Agriculture (USDA loans)
purchased or securitized by the Federal Home Loan Mortgage Corporation (Freddie Mac) or the Federal National Mortgage Association (Fannie Mae).
Likely includes more than 90% of home mortgages
How to Request Forbearance
Submit a request to the borrower’s servicer; and
Affirm that the borrower is experiencing a financial hardship during the COVID–19 emergency
Length of Forbearance: up to 180 days, and shall be extended for an additional period of up to 180 days at the request of the borrower (at the borrower’s request, either the initial or extended period of forbearance may be shortened).
No additional Interest of Fees: 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.
No additional documentation: Servicer cannot require additional documentation other than the borrower’s attestation to a financial hardship caused by the COVID–19 emergency.
Foreclosure Moratorium: Except with respect to a vacant or abandoned property, 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 for not less than the 60-day period beginning on March 18, 2020.
Multifamily Properties Forbearance
(Properties with more than 5 families, CARES Act, §4023)
A servicer of a Federally backed multifamily mortgage loan that was current on its payments as of February 1, 2020, shall provide a forbearance
Upon an oral or written request for forbearance to the servicer affirming that the multifamily borrower is experiencing a financial hardship during the COVID–19 emergency.
Multifamily borrower: means a borrower of a residential mortgage loan that is secured by a lien against a property comprising 5 or more dwelling units.
Federally backed multifamily mortgage loan: 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 5 or more families, including any such secured loan, the proceeds of which are used to prepay or pay off an existing loan secured by the same property; 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 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 the Federal Home Loan Mortgage Corporation (Freddie Mac) or the Federal National Mortgage Association (Fannie Mae).
Broader definition than single family.
Covered period: from 3/27/2020 to the termination of the state of emergency or 12/31/2020, whichever is sooner.
Length of Forbearance: up to 30 days and extend the forbearance for up to 2 additional 30 day periods upon the request of the borrower provided that, the borrower’s request for an extension is made during the covered period, and, at least 15 days prior to the end of the original forbearance period.
Right to Discontinue: A multifamily borrower shall have the option to discontinue the forbearance at any time.
Renter protections during Multifamily Borrower’s Forbearance
(Properties with more than 5 families, CARES Act, §4023(d))
A multifamily borrower that receives a forbearance may not, for the duration of the forbearance:
evict or initiate the eviction of a tenant from a dwelling unit located in or on the applicable property solely for nonpayment of rent or other fees or charges
charge any late fees, penalties, or other charges to a tenant from a dwelling unit located in or on the applicable property for late payment of rent
may not require a tenant to vacate a dwelling unit located in or on the applicable property before the date that is 30 days after the date on which the borrower provides the tenant with a notice to vacate
may not issue a notice to vacate a dwelling unit located in or on the applicable property until after the expiration of the forbearance
Applicable property: with respect to a Federally backed multifamily mortgage loan, means the residential multifamily property against which the mortgage loan is secured by a lien.
Temporary Mortarium on Eviction Filing
(Property with any Federally backed loans, CARES Act, §4024)
Covered Dwelling: A dwelling that is occupied by a tenant pursuant to a residential lease or without a lease or with a lease terminable under State law; and is on or in a covered property.
Covered Property: Any Property that has any of the following:
participation in a covered housing program (as defined in section 41411(a) of the Violence Against Women Act of 1994 (34 U.S.C. 12491(a)))
participation in the rural housing voucher program under section 542 of the Housing Act of 1949 (42 U.S.C. 1490r)
a Federally backed housing loan
designed principally for the occupancy of 1- to 4- families
secured by a first or subordinate lien on residential real property (including individual units of condominiums and cooperatives), including any such secured loan, the proceeds of which are used to prepay or pay off an existing loan secured by the same property
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 the Federal Home Loan Mortgage Corporation (Freddie Mac) or the Federal National Mortgage Association (Fannie Mae).
a Federally backed multifamily mortgage loan (see above)
residential multifamily real property designed principally for the occupancy of 5 or more families
secured by a first or subordinate lien, including any such secured loan, the proceeds of which are used to prepay or pay off an existing loan secured by the same property
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 the Federal Home Loan Mortgage Corporation (Freddie Mac) or the Federal National Mortgage Association (Fannie Mae).
During the 120-day period from 3/27/2020 to 7/25/2020, the lessor of a covered dwelling may not
make, or cause to be made, any filing with the court of jurisdiction to initiate a legal action to recover possession of the covered dwelling from the tenant for nonpayment of rent or other fees or charges;
charge fees, penalties, or other charges to the tenant related to such nonpayment of rent;
require the tenant to vacate the covered dwelling unit before the date that is 30 days after the date on which the lessor provides the tenant with a notice to vacate; or
issue a notice to vacate the covered dwelling unit until after the expiration of the period
Credit Protection
The Cares Act at §4021 amends the Fair Credit Reporting Act (15 U.S.C. 1681s–2(a)(1).
A furnisher of credit who makes an accommodation to a consumer who is current is required to continue to report the credit obligation is current. If the obligation was delinquent when the accommodation was made, that delinquent status is maintained during the period of accommodation and the status must be shown as current if the obligation is brought current. 15 U.S.C. 1681s–2(a)(1)(F)(ii)(I) (as amended). This does not apply if the obligation or account has been charged off.
An accommodation is defined as “an agreement to defer 1 or more payments, make a partial payment, forbear any delinquent amounts, modify a loan or contract, or any other assistance or relief granted to a consumer who is affected by the coronavirus disease 2019 (COVID–19) pandemic during the covered period.” 15 U.S.C. 1681s–2(a)(1)(F)(i) (as amended).
Covered period from 1/31/2020 to 120 days after the termination of the state of emergency or 7/25/2020, whichever is later.
Is your loan Federally backed?
To find out whether your loan is backed by the Federal Government, you can:
Review your mortgage or closing documents. If you received a VA or FHA loan, it will contain that language.
Check online. Use loan lookup tools provided by Fannie Mae or Freddie Mac to find out if either of those two government-backed providers own your mortgage.
Check the Mortgage Electronic Registration Systems (MERS) website to find your servicer if you don't know who that is.
Call or write your mortgage servicer, who is required to tell you who owns your mortgage and provide you with the name, address, and phone number of whoever owns your mortgage.
What If You Don't Have a Government Backed Mortgage?
Federal regulators believe most non-government-backed lenders and servicers will adopt policies similar to those mandated by the CARES Act.
To find out,
Contact your loan servicer
Ask what programs they have in place to help homeowners impacted by the coronavirus outbreak.
Make sure to specifically mention that you are harmed by the “COVID-19 or coronavirus emergency.”
Follow any instructions you are given.
Although the CARES Act does not require private lenders to offer relief, if you and your lender come to any type of loan modification agreement, the law regarding not reporting reduced or paused payments to credit bureaus does apply to you.
In addition, the CARES Act allows banks to avoid reporting these forbearances and assistance as trouble assets, removing a potential barrier to assisting borrowers.
North Carolina Executive Order 124 restricts the use of foreclosure in North Carolina. It is explained in detail here.
If you have a questions about the CARES ACT or issues affecting your property in this crisis, contact Allen Stahl + Kilbourne
By James Kilbourne and Jeff Stahl
Updated: March 30, 2020
Any statements contained herein do not constitute a formal legal opinion and should not be relied upon as such. These articles are intended for general informational purposes only. Nothing expressed shall be grounds for the creation of an attorney-client relationship. Our attorneys can give legal advice only in the context of an attorney-client relationship after a conflict check, the execution of a representation agreement and a discussion of the specific information and unique issues of your particular circumstances.
The situation surrounding COVID-19/coronavirus is changing constantly; as a result, any discussions that might take place may not necessarily reflect the latest information regarding recently-enacted, or pending or proposed legislation or guidance that could override, alter or otherwise affect existing legal analysis.
