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HUD Issues CARES Act Mortgage Relief Guidance

HUD issued Mortgagee Letter 2020-09 on April 10 implementing a standard forbearance protocol for multifamily borrowers, servicers, and lenders that follows provisions of Section 4023 of the “Coronavirus Aid, Relief, and Economic Securities (CARES) Act.” A multifamily borrower that receives forbearance under the CARES Act may not evict or initiate the eviction of a tenant solely for nonpayment of rent or other fees or charges for the duration of the forbearance.

Section 4023 is for borrowers with multifamily mortgages insured by the Federal Housing Administration (FHA) or that participate in other HUD Multifamily housing programs. The guidelines in the Mortgagee Letter are for properties that experience cash flow shortages as a result of decreased rent receipts caused by renters’ failure to pay rent due to the coronavirus pandemic. Although the Mortgagee Letter is written for multifamily borrowers, servicers, and lenders, advocates and residents will find one section instructive because it clearly lists the provisions in Sections 4023 and 4024 of the CARES Act that prohibit evictions by multifamily borrowers (multifamily property owners) during the period a borrower receives mortgage forbearance (see Memo, 4/13).

According to the Mortgagee Letter (page 2), a multifamily borrower that receives forbearance under Section 4023 of the CARES Act may not, for the duration of the forbearance, evict or initiate the eviction of a tenant solely for nonpayment of rent or other fees or charges. The borrower also may not charge a tenant any late fees, penalties, or other charges because of late rent payment. In addition, a multifamily borrower may not require a tenant to vacate a home until 30 days after the borrower provides a tenant with a notice to vacate, nor may a borrower issue a notice to vacate until after the expiration of the forbearance.

Section 4024 of the CARES Act states that during the 120-day period beginning on the date of enactment of the CARES Act (March 27) the owner of a covered home may not make or cause to be made any filing with a court to initiate a legal action to recover possession of a covered home from a tenant for nonpayment of rent or other fees or charges (see Memo, 4/13 for list of properties that are “covered”). Nor can an owner charge fees, penalties, or other charges to a tenant related to nonpayment of rent.

HUD encourages borrowers (page 5) to enter into payment plans with renters who experience income reduction or temporary loss of household income but are able to make up the difference with increased monthly payments over time.

Mortgage forbearance is available to a multifamily borrower with an FHA-insured mortgage loan that was current on its payments as of February 1, 2020. The borrower may submit an oral or written request for forbearance to the borrower’s servicer affirming the borrower is experiencing a financial hardship during the coronavirus pandemic.

When a servicer receives an oral or written request for forbearance from a multifamily borrower, the servicer must document the financial hardship and provide forbearance for up to 30 days. Forbearance may be extended for up to two additional 30-day periods if requested by the 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 in effect at that time.

Mortgagee Letter 2020-09 is at: https://bit.ly/3biHQmE