CARES Act Eviction and Late Fee Moratorium and Commercial Loan Forbearance
Temporary Moratorium on Eviction Filings
The CARES Act enacted a Temporary Moratorium on Eviction Filings.
As it might apply to some manufactured home communities, this moratorium ONLY applies to “federally backed multifamily mortgage loans.” For those Texas MH communities with federally back commercial loans, this new temporary eviction moratorium does apply.
A “Federally backed multifamily mortgage loan,” is going to be any loan backed by Freddie Mac or Fannie Mae, HUD or any federal program, which the law defines specifically as follows:
(A) is secured by a first or subordinate lien on residential multifamily real property designed principally for the occupancy of 5 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.
Over the last several years many MH community owners refinanced their commercial loans under one of the Fannie or Freddie commercial loan programs due to lower interest rates and preferential underwriting compared to private commercial loan offerings. Therefore, for those properties the eviction moratorium imposed by the CARES Act will apply.
When the eviction moratorium does apply, it requires the following:
(b) Moratorium.—During the 120-day period beginning on the date of enactment of this Act (March 27, 2020), the lessor of a covered dwelling may not—
(1) make, or cause to be made, any filing with the court of jurisdiction to initiate a legal action to recover possession of the covered dwelling from the tenant for nonpayment of rent or other fees or charges; or
(2) charge fees, penalties, or other charges to the tenant related to such nonpayment of rent.
(c) Notice.—The lessor of a covered dwelling unit—
(1) may not require the tenant to vacate the covered dwelling unit before the date that is 30 days after the date on which the lessor provides the tenant with a notice to vacate; and
(2) may not issue a notice to vacate under paragraph (1) until after the expiration of the period described in subsection (b).
The above provisions mean the moratorium period runs from Mach 27 – July 25 (that is the 120-days) and then subpart (c) means once July 25 has passed, only then can a landlord/property owner send a tenant a 30-day notice of eviction. This is important because typically in Texas we have either a 3-day or 10-day notice of eviction. But the new federal law is going to require at least a 30-day notice. The effect of this is for a MH community owner with a federally backed commercial loan, the earliest they could evict a tenant would be August 24, 2020 (30-days after July 25).
The provisions under the CARES Act do not extinguish or eliminate a tenants’ rent obligations.
A tenants’ monthly rent is still due under these provisions and will accrue if the tenant does not pay their rent during the eviction moratorium. But the new law only allows the accrual of monthly rent, meaning landlords cannot tack on late fees in addition to the monthly rent during the eviction and late fee moratorium period.
Other Eviction Moratoriums:
There is also currently a Texas statewide moratorium imposed by the Texas Supreme Court. We covered this in a previous membership post, but as a reminder the statewide eviction moratorium set by the TX Supreme Court lasts until April 30th. However, this has already been extended once - it was originally April 20th and then on Monday they added 10 more days. We are watching for any extensions from the TX Supreme Court and will continue to notify members.
There are also some local jurisdiction eviction moratoriums, but most of these are shorter than the current statewide moratorium, and for federally back properties are shorter than the 120-day CARES Act requirements.
Also, the statewide and local eviction moratoriums apply to ALL rental properties, not just those with federally back mortgage loans like the federal law (CARES Act).
Forbearance for Multifamily Properties with Federally Back Loans
The CARES Act also provided an optional loan forbearance program for some borrowers/property owners.
A property owner with a federally backed multifamily mortgage loan who is experiencing financial hardship during COVID-19 can request a forbearance on their commercial loan obligations. This will allow the borrower to suspend principal and interest monthly payments. The debt obligation is not forgiven and does not go away, but it is merely pushed off until later.
A property owner can request this from their loan servicer, who will then document the financial hardship. If a hardship can be proven, and if the property owner chooses to avail themselves of this relief from their federally supported loan, then they will be granted forbearance for 30-days.
This can then be extended up to 2 additional 30-day periods, again upon request of the borrower/property owner. In order to extend, the borrower needs to make the extension request at least 15-days prior to the end of their current forbearance.
Also, at any time during a granted forbearance or forbearance extension, the borrower/property owner can choose to discontinue the forbearance.
If a borrower has made this optional election, and it has been granted, then subpart (d) kicks in – Renter Protections During Forbearance Period. This is the subpart that says that during the forbearance time the borrower may not:
(1) 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; or
(2) charge any late fees, penalties, or other charges to a tenant described in paragraph (1) for late payment of rent.
Again, the eviction and late fee prohibitions already apply automatically per Section 4024 until effectively the end of July 2020, so during this time period the prohibitions are redundant.
But the forbearance program lasts from Mach 27, 2020 until the sooner of the President declaring an end to the national emergency or December 31, 2020. For any borrower eligible for this program and who chooses to use the program later in the year in which their loan forbearance extends beyond the summer months, then the eviction and late fee prohibitions under the loan forbearance program will apply.