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July 27, 2020

What Borrowers Need to Know About the CARES Act Today

Richard  Martinez and Leanne Spies
Article By
Richard Martinez, Senior Vice President, Production & Sales
Leanne Spies, Senior Vice President, Asset Management & Operations

 

The global pandemic has heightened the importance of home to all of us, as well as the critical role we play in supporting multifamily housing for millions of families across the country. In response to this national crisis, Congress has enacted legislation that places certain legal obligations on multifamily borrowers with federally backed mortgages, including those purchased and/or securitized by Freddie Mac.

These interventions are unprecedented, as are hundreds of additional state and local laws affecting multifamily properties that have been enacted throughout the country to address this unique crisis. As for provisions that directly affect borrowers, there are two sections of the CARES Act that you should be aware of: a national eviction moratorium (section 4024) and separate provisions that govern our COVID-19 forbearance agreements (section 4023).

As we reach the end of the national eviction moratorium in the CARES Act, we all need to remind ourselves of the responsibilities we still have under the law:

National Eviction Moratorium

The CARES Act eviction moratorium that applies to all Freddie Mac Multifamily loans ended on July 25, unless Congress takes further action. However, there are certain responsibilities under the Act, and through the Freddie Mac forbearance program, that will continue:

  • Any notice to vacate related to nonpayment of rent requires a 30-day notice, which may not be issued prior to the end of the moratorium on July 25.
  • In addition, borrowers may not charge tenants fees or penalties due to nonpayment of rent for the period covered by the moratorium.

Borrowers should be aware that failure to abide by these provisions of federal law can trigger a default under Freddie Mac’s loan documents.

Additional Requirements for Loans with Forbearance Agreements

For loans with a current Freddie Mac COVID-19 related forbearance agreement, certain tenant protections extend beyond the expiration of the nationwide eviction moratorium. Other additional protections associated with our revised program may also apply:

  • Borrowers may not evict, give notice of, or start an eviction of a renter for nonpayment during the forbearance period.
  • Borrowers cannot charge late fees, penalties, or other charges related to tenant nonpayment of rent during the forbearance period, as required by the CARES Act. This protection was extended to the repayment period as well, for forbearance agreements and supplemental forbearance agreements entered into after June 29.
  • As of June 29, borrowers entering into new or supplemental forbearance agreements must provide flexibility in repayment of back rent, allowing for it to be paid over a period of time and not in a lump sum.
  • Additionally, borrowers entering into new forbearance agreements or supplemental forbearance agreements must provide 30-days’ notice to tenants prior to any eviction taking place during the repayment period.
  • Renters need not show COVID-19 related hardship to be eligible for any of the protections listed above.

Borrowers who do not comply with the terms of our forbearance agreements or loan documents, which include a requirement to comply with all laws having jurisdiction over the borrower’s property (for example, the CARES Act), are in default and the borrower may face lender enforcement action.

State and Local Eviction Protections

While the CARES Act and Freddie Mac forbearance program apply nationally, there may also be tenant protections in place at the state and/or local level. Borrowers are encouraged to consult their legal representative about laws that may apply to them.

Renter Resources

To help tenants struggling to pay rent, we have a free financial hotline and other information available to renters.

We thank all our lenders and borrowers for rising to the challenge of this pandemic and their unwavering partnership in making home possible. We appreciate your efforts to abide by these rules of the road and understand you may have questions related to how these requirements might affect your unique circumstances. Borrowers with questions on this topic are strongly encouraged to reach out to their lenders for support.

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