Yesterday we wrote about Sacramento’s ban on evictions. Last night the U.S. Senate passed the “Coronavirus Aid, Relief, and Economic Security Act” .or “CARES” Act, which also includes a ban on evictions. The bill prohibits evictions “for “nonpayment of rent or other fees or charges”. The Senate passed the bill 96-0, indicating that the bill is also likely to pass in the House of Representatives . Presumably, it will also receive President Trump’s signature.
What properties are covered by the ban?
The ban covers any property with a federally backed mortgage. That would include USDA, VA, FHA, Fannie Mae and Freddie Mac backed mortgages. Additionally, the ban would also include any properties that receive federal government housing vouchers, such as Section 8. The ban includes single family, condo’s, and multi family properties. Furthermore, landlords are prohibited from charging late fees, penalties or other charges for late payment of rent.
Key components of the eviction ban
- Ban to last 120 days from enactment of the bill
- No requirement of tenant to prove they were impacted by virus
- Notice to vacate, cannot be filed until after moratorium is lifted
- Any notice to vacate, must allow tenant 30 days
- Ban on evictions does not apply to properties with private mortgages or without Federal loans
How will Landlords pay their Mortgage if Tenants Don’t Pay Rent?
In addition to the ban on evictions, the bill includes a ban on foreclosures, including landlords. The bill provides for forbearance for any borrower who “attests” that they have been financially impacted by COVID-19. This would include landlords whose mortgages are backed by government programs. These landlords can request forbearance, for up to 180 days. Borrowers can request an additional 180 days forbearance. However, they must make the request prior to the end of the first 180 days. In addition, during the forbearance period, no fees, penalties or additional interest may be charged to the borrower.
Per Section 4022 of the bill, borrowers simply need to contact their lender for forbearance. “Upon receiving a request for forbearance from a borrower..the servicer shall with no additional documentation required other than the borrower’s attestation to a financial hardship caused by the COVID–19 emergency… provide the forbearance for up to 180 days, which may be extended for an additional 180 days at the request of the borrower.”
Forbearance Limited for Multifamily Property Owners
Multi family homes have different rules for forbearance. For multifamily, the servicer is required to document the borrower’s financial hardship and provide forbearance up to 30 days. The borrower can make two more 30 day forbearance requests provided that each request is made 15 days or more before the end of the current forbearance. In addition, as long as the borrower is receiving forbearance, they cannot issue a notice to vacate.
What Happens After the Forbearance Period has Ended?
There’s no direction in the bill as to what happens when the forbearance period is up for borrowers. Is the amount in arrears due and payable or will the borrower’s loan be extended by the duration of the forbearance period? Presumably, it will be up to the borrower and lender to work out.