On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law in response to the COVID-19 pandemic. The pandemic has disrupted all aspects of the economy, including the multifamily real estate market. Sections 4023 and 4024 of the CARES Act are intended to provide certain multifamily landlords and tenants with economic relief during these uncertain times, to the extent the underlying property involves a federally backed mortgage loan.
Section 4023: Forbearance of Residential Mortgage Loan Payments for Multifamily Properties with Federally Backed Loans:
Section 4023 requires a servicer to provide forbearance for multifamily borrowers with federally backed multifamily mortgage loans who have experienced financial hardship caused by the COVID-19 emergency, so long as:
1) The borrower has submitted an oral or written request for forbearance affirming that the borrower is experiencing financial hardship.
2) The borrower was current on its payments as of February 1, 2020.
The initial forbearance will be for a period of 30 days, which can be extended for up to two additional 30-day periods, so long as the extension request is made 15 days prior to the expiration of the then-current 30-day forbearance period.
A borrower's right to request the above initial forbearance (and the right to request an extension of the initial forbearance period) expires on the earlier of (i) the termination date of the national emergency concerning COVID-19 and (ii) December 31, 2020. A borrower has the right to discontinue the forbearance at any time.
During the period of forbearance, the borrower may not:
1) Evict or initiate the eviction of a tenant solely for nonpayment of rent or other fees or charges; or
2) Charge any late fees, penalties or other charges to a tenant for late payment of rent; or
3) Issue a notice to vacate.
Following expiration of the forbearance, a borrower that receives a forbearance may not require a tenant to vacate the tenant's unit before the date that is 30 days after the date on which the borrower provides the tenant with a notice to vacate.
The above-described Section 4023 applies to loans secured by mortgages on real property designed for 5 or more families and that are (1) made, insured, guaranteed, supplemented or assisted by any agency of the federal government, (2) made in connection with a program administered by the Secretary of Housing and Urban Development (HUD) or (3) purchased or securitized by the Federal Home Loan Mortgage Corporation (Freddie Mac) or the Federal National Mortgage Association (Fannie Mae).
Section 4024: Temporary Moratorium on Eviction Filings
Under Section 4024, regardless of whether a borrower has requested a forbearance under Section 4023 as described above, landlords are restricted from eviction filings as follows:
- During the 120-day period beginning on the date of the enactment of the CARES Act, landlords are prohibited from (1) initiating legal action to recover possession of a tenant's unit for the nonpayment of rent, (2) charging fees, penalties or other charges to the tenant related to such nonpayment of rent or (3) issuing a notice to vacate.
- The foregoing restriction applies to any property where the landlord's mortgage on that property is insured, guaranteed, supplemented, protected or assisted in any way by Fannie Mae, Freddie Mac, HUD, the rural housing voucher program or the Violence Against Women Act of 1994.
Similar to Section 4023, following expiration of the 120-day moratorium period, Section 4024 also prohibits landlords from requiring a tenant to vacate the tenant's unit before the date that is 30 days after the date on which the landlord provides the tenant with a notice to vacate.
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