On March 24, 2020, in response to the growing anticipation that renters in multifamily properties are being negatively impacted by the implications of the Coronavirus Disease 2019 (“COVID-19”), the Federal Housing Finance Agency (“FHFA”) announced mortgage forbearance for multifamily property borrowers with the condition that the borrower suspend all evictions for renters unable to pay rent due to the impact of COVID-19. The forbearance is available to all multifamily properties securing a loan backed by either Fannie Mae or Freddie Mac (the “GSEs”) which properties have been negatively impacted by COVID-19.
In the press release announcing the forbearance and eviction relief, FHFA Director Mark Calabria said: “Renters should not have to worry about being evicted from their home, and property owners should not have to worry about losing their building, due to the coronavirus. The multifamily forbearance and eviction suspension offered by the [GSEs] should bring peace of mind to millions of families during this uncertain and difficult time. The [GSEs] are working with mortgage servicers to ensure that these programs are implemented immediately so that property owners and renters experiencing hardship because of the coronavirus can get the assistance they need.”
Under Fannie Mae’s official guidance for the mortgage forbearance program, if the lender determines that a forbearance is necessary, then the lender may execute a forbearance agreement with the borrower for up to 3 monthly payments beginning on the first missed monthly payment, provided that the missed payment did not occur before April 1, 2020. The forbearance agreement must require the borrower to bring its mortgage current by the earlier of (1) 12 months after the end of the forbearance period, or (2) receipt by borrower of business interruption insurance proceeds or other assistance or relief program proceeds. In addition, the borrower must suspend all evictions of tenants who have been financially impacted by COVID-19 until the later of (x) 90 days after the expiration date of the forbearance agreement, or (y) the mortgage loan is brought current. Furthermore, the borrower must allow the affected tenants to repay any missed payments over a period of no more than 12 months, without late charges (in addition to the tenant’s regular monthly rent). Fannie Mae will have to approve any forbearance exceeding 3 months.
Freddie Mac has yet to issue its official guidance for the mortgage forbearance program; however, we expect similar treatment based on Freddie Mac’s press announcement.
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