Member Article

The CARES Act was signed into law on March 27, 2020 and provides emergency relief for the American economy by imposing certain restrictions on eviction, forbearance for certain loans, and foreclosure relief for owners of single-family and multi-family assets secured by federally-insured mortgages.

The following is a summary of the relevant provisions.

A. Borrowers for residential real property designed principally for the occupancy of 1-4 families

Under the CARES Act, a borrower with a “federally-backed mortgage loan*” experiencing a financial hardship due, directly or indirectly, to the COVID-19 emergency may request forbearance on the federally-backed mortgage loan, regardless of delinquency status, by: (A) submitting a request to the borrower’s servicer and (B) affirming the borrower is experiencing a financial hardship due to the COVID-19 emergency. Loan servicers are required to grant the forbearance with no additional documentation from the borrower.

The duration of such initial forbearance shall be up to 180-days and borrowers are eligible for a 180 day extension if requested during the initial 180-day period. During the forbearance period, no fees, penalties, or interest beyond the amounts scheduled or calculated as if the borrower made all contractual payments on time and in full will accrue (Section 4022(b)(2) and (3)). Both the initial and extended 180-day period of forbearance may be shortened at the borrower’s request.

1. Foreclosure Litigation

Section 4022(c)(2) further imposes upon servicers of federally-backed mortgages a 60-day moratorium beginning on March 18, 2020 on foreclosures, except with respect to a vacant or abandoned property. For all other foreclosures, servicers 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 purposes of Section 4022:

• a “Federally backed mortgage loan” includes any loan 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 1-4 families that is (A) insured by the Federal Housing Administration under title II of the National Housing Act (12 U.S.C. § 1707 et seq); (B) insured under Section 255 of the National Housing Act (12 U.S.C. § 1715z-20); (C) guaranteed under Section 184 or 184A of the Housing and Community Development Act of 1992 (12 U.S.C. §§ 1715z-13a, 1715z-13b); (D) guaranteed or insured by the Department of Veterans Affairs; (E) guaranteed or insured by the Department of Agriculture; (F) made by the Department of Agriculture; or (G) purchased or securitized by the Federal Home Loan Mortgage Corporation or the Federal National Mortgage Association.

B. Multifamily Borrowers (5 or more families)

Section 4023 provides that, during the covered period, a multi-family borrower with a federally-backed multifamily mortgage loan current on its payments as of February 1, 2020 may submit an oral or written request for forbearance under Section 4023(a) to the borrower’s servicer affirming the multifamily borrower is experiencing a direct or indirect financial hardship during the COVID-19 emergency.

Upon receipt of an oral or written request from a multifamily borrower, a servicer must: (A) document the financial hardship; (B) provide the forbearance for up to 30 days; and (C) extend the forbearance for up to two additional 30-day periods upon the request of borrower, provided the borrower’s request for an extension is made during the covered period and at least 15 days prior to the end of the forbearance period. The borrower may discontinue the forbearance at any time.

*For purposes of Section 4023:

• a “covered period” is the period beginning on the date of enactment of the CARES Act and ending upon the sooner of “(A) the termination date of the national emergency concerning the novel coronavirus disease (COVID-19) outbreak declared by the President on March 13, 2020 under the National Emergencies Act (50 U.S.C. § 1601 et seq.) or (B) December 31, 2020.”
• a “multifamily borrower” is a borrower of a residential mortgage loan secured by a lien against a property comprising five or more dwelling units.
• a “federally-backed multifamily mortgage loan” includes any loan, other than temporary financing, such as a construction loan, that “(A) is secured by a first or subordinate lien on residential multifamily real property designed principally for the occupancy of five 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 (B) 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 or the Federal National Mortgage Association.”

C. Renter Protections (Multi-Family Borrowers)

Under 4023(d), a multifamily borrower receiving forbearance may not:

• 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 related to late payment of rent;
• 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; or
• Issue a notice to vacate until after the expiration of the forbearance (Section 4023(d) and (e)).

D. Temporary Moratorium on Eviction Filings

Section 4024 further imposes a temporary 120-day non-foreclosure related eviction moratorium beginning on the date of the enactment of the Act, regardless of whether such lessor is the subject of any forbearance granted under the Act. During the 120-day period, a lessor may not:

• File an eviction action from a tenant for non-payment of rent;
• Charge fees, penalties, or other charges to a tenant for non-payment of rent;
• Issue a notice to vacate; or
• Require a tenant to vacate before the date that is 30 days after the date on which the lessor provided in a notice to vacate

For any questions or more information, contact your Dinsmore attorney.