First, thank you for your partnership as we have all dealt with the market impacts of COVID-19. It’s never been more clear to me why the Delegated Underwriting and Servicing (DUS®) model is so successful – it’s the deep level of care our lenders bring to the business, along with their expertise, and the prudence baked in to our risk-sharing model.
As the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) initial eviction moratorium nears its July 25 expiration date, I’m writing to remind all of us of the important protections included in the Act.
The CARES Act provides relief for and imposes certain restrictions on multifamily borrowers with a federally backed multifamily mortgage loan. This applies to all Multifamily loans purchased or securitized by Fannie Mae.
Relief for Borrowers: Forbearance Options
Fannie Mae has aligned its Multifamily forbearance program with the CARES Act. Multifamily borrowers who are suffering a financial hardship should contact their servicers to discuss the available options.
The forbearance guidance in Section 4023 of the CARES Act states that to receive forbearance, a multifamily borrower must make a request to its servicer and affirm that they are experiencing a financial hardship due to the COVID-19 emergency.
Under the CARES Act, servicers must document the financial hardship, so borrowers should be prepared to provide items like their current rent roll, monthly delinquency reports, monthly collections reports, lease cancellation reports, and current operating statements. This list is only representative, and the servicer may request different or additional documents.
On June 29, Fannie Mae announced that DUS lenders have been delegated the decision to extend existing forbearances by three months for a total available forbearance of up to six months. If extended, once the forbearance period concludes the borrower may qualify for up to 24 months to repay the missed payments.
Given the unprecedented health and economic challenges caused by the COVID-19 emergency, many efforts have been undertaken to help homeowners and renters stay in their homes. These efforts include certain limitations on evictions of renters for nonpayment of rent.
First, while in forbearance, Fannie Mae borrowers must suspend all evictions for renters unable to pay rent. Fannie Mae believes it is important for our borrowers who are receiving relief from Fannie Mae through a forbearance to likewise extend relief to renters who are unable to pay their rent.
The CARES Act also addresses evictions and includes two separate moratoriums on evictions for nonpayment of rent. Section 4023 of the CARES Act includes a moratorium applicable to Fannie Mae’s multifamily borrowers who receive the forbearance provided by the CARES Act, but there is also a moratorium that applies to Fannie Mae’s multifamily borrowers even if they do not seek a forbearance.
The moratorium under Section 4024 of the CARES Act restricts our multifamily borrowers from evicting tenants for nonpayment of rent in all federally-backed properties for the initial 120 days of the CARES Act, which means through July 25. Importantly, this section of the CARES Act also requires the borrower to give a tenant a 30-day notice to vacate before the borrower can require the tenant to vacate the unit. This notice cannot be given before the moratorium period expires. All landlords with Fannie Mae-financed loans are subject to this restriction on evictions and the requirement to provide the notice to vacate to tenants.
Finally, state and local laws or ordinances may also impact a borrower’s ability to evict tenants. Consult with your counsel to ensure that you are in compliance.
Other Relief for Tenants
Beyond the eviction limitations that may apply to a property as discussed above, for Fannie Mae-financed multifamily properties with a new, amended, or extended forbearance, the borrower is required to provide the following tenant protections during the borrower’s forbearance and repayment periods:
- Flexibility to repay back rent over time and not in a lump sum;
- No late fees or penalties for non-payment of rent; and
- Minimum 30-day notice to vacate before recovering possession of the unit from the tenant.
Fannie Mae has launched a Here to Help campaign to help tenants understand their options for relief if they are financially impacted by COVID-19. For more information, visit the Renters Resource webpage. This page also contains information about our Renters Resource Finder tool and access to Disaster Response Network counselors, who can guide tenants toward even more resources.
Regardless of how long the COVID-19 emergency lasts, Fannie Mae Multifamily is here to work with multifamily borrowers who are suffering a financial hardship. We will also be here for the days following the national emergency to work with our lenders and borrowers during the recovery.
Thank you for the work you do to help us fulfill our mission of providing a safe and sound source of liquidity and financing to multifamily lenders and borrowers in every market, every day.