Title IV of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which is entitled “Economic Stabilization and Assistance to Severely Distressed Sectors of the United States Economy” provides critical protections to consumers with regard to their credit, mortgage, and rent obligations.
As part of the coronavirus crisis and its effects on consumers’ income, many people have contacted their banks and lenders to request forbearances or reduced payment plans. In turn, many banks and lenders have obliged these requests. Under the new law, banks and other lenders that provide such forbearances and modified payments will continue to report the consumers’ credit status as “current” or as the most recent status reported (unless the consumer becomes current). This will allow consumers to protect their credit scores and not suffer adverse consequences to their credit histories during this difficult time. The credit protection provided by the CARES Act is available beginning January 31, 2020, and will end 120 days after the date the national emergency declaration related to the coronavirus is terminated.
In addition to the credit protection, tenants will be protected from eviction lawsuits and late fees and penalties related to the non-payment of rent for 120 days from the date CARES Act is enacted. However, this protection is limited to tenants that live at a property where the landlord’s mortgage on that property is insured, guaranteed, supplemented, protected, or assisted in any way by HUD, Fannie Mae, Freddie Mac, the rural housing voucher program or the Violence Against Women Act of 1994.
For consumers with mortgages that are purchased by Fannie Mae and Freddie Mac, insured by HUD, VA, or USDA, or directly made by USDA, foreclosures are prohibited for a 60-day period beginning on March 18, 2020. Furthermore, borrowers that have experienced financial hardship related to the COVID-19 emergency will be provided up to 180 days of forbearance under such mortgage loans.
Forbearance for Multifamily Properties with Federally Backed Loans
There will be up to 90 days of forbearance for multifamily borrowers who have experienced financial hardship. This option is available only to borrowers with loans to a real property designed for five or more families that are purchased, insured, or assisted by Fannie Mae, Freddie Mac, or HUD. Importantly, these borrowers receiving forbearance will not be able to evict or charge late fees to tenants for the duration of their forbearance period.