On March 27, 2020, the President signed into law the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). Section 4024 of the CARES Act contains several provisions that are of particular important to Landlords.
Section 4024 places a national Moratorium of 120 days on (1) charging of fees, and (2) initiating evictions for non-payment of rent on any rental property that is subject to a Federally Backed Mortgage (or Multifamily Mortgage) Loan.
Which properties fall within the Moratorium? The CARES Act places the moratorium on “covered dwellings” that are located on “covered properties.”
A “Covered Dwelling” is defined as a dwelling occupied by a tenant (either with a written lease, or without a lease) that is on a “Covered Property.” A “dwelling” includes any building, structure, or portion thereof designed or intended for occupancy as a residence by one or more families.
A “Covered Property” is defined as a property that participates in either (1) “a covered housing program (as defined in…the Violence Against Women Act of 1994…) or a rural housing voucher program under the Housing Act of 1949; or (2) has a Federally backed mortgage loan or a Federally backed multifamily mortgage loan. Federally backed mortgage loans include loans on residential real property insured, guaranteed, or assisted in any way by any officer or agency of the Federal Government. Such Federally backed mortgage loans likely include loans guaranteed by the Housing and Community Development Act, the Department of Veteran Affairs, Fannie Mae or Freddie Mac, or the Department of Agriculture.
When is the Moratorium? The Moratorium extends for 120-days after enactment of the CARES Act, or through July 25, 2020.
What is prohibited during the Moratorium? During the 120-day Moratorium, a landlord (1) may not start any legal action to recover possession of the Covered Dwelling for nonpayment of rent or other fees or charges; or (2) may not assess fees/ penalties, or other charges to the tenant for nonpayment of rent.
What can a landlord do after the Moratorium? Once the Moratorium expires, the Landlord of a Covered Dwelling may issue a notice to vacate to the tenant, but may not require the tenant to vacate until 30 days after the notice to vacate is issued.
Does a landlord have any avenues for relief? Section 4022 of the CARES Act establishes a program for borrower-initiated forbearance, and a moratorium on foreclosures on federally-backed mortgage loans.
Similar to section 4024’s Moratorium on evictions, section 4022 defines a federally-backed mortgage loan to include loans insured by FHA under title II of the National Housing Act; guaranteed under the Housing and Community Development Act of 1992; guaranteed by the VA; guaranteed by the Department of Agriculture; or purchased by Fannie Mae or Freddie Mac.
If a borrower under a federally-backed mortgage loan experiences a “hardship due, directly or indirectly, to the COVID-19 emergency,” the borrower may request forbearance from the borrower’s servicer. Upon requesting such forbearance and affirm the hardship, the borrower “shall be granted for up to 180 days, and shall be extended for an additional period of up to 180 days at the request of the borrower.” During the forbearance period, no additional fees, penalties, or interest can accrue beyond those scheduled or calculated as if the borrower made all payments on time and in full.
Additionally, between March 18 and May 17, no mortgage servicer of a federally-backed mortgage loan may initiate any foreclosure process, move for an order of sale, and not execute a foreclosure-related eviction or foreclosure sale.
If you would like to discuss the impact of the CARES Act on foreclosures, or on landlord-tenant matters, please contact Bert Andia at 336.273.1600 or [email protected]