Upon Certain Mortgage Foreclosures and Evictions

Today, March 27, 2020, the President enacted H.R. 748, more commonly known as the “coronavirus stimulus package,” “coronavirus relief bill” or “coronavirus stimulus bill,“ into law. Section A entitled the “Coronavirus Economic Stabilization Act of 2020” (the “Act”) contains provisions which affect mortgage foreclosures and tenant evictions where the property is subject to a federally backed mortgage or multi-family mortgage loan. How do these provisions of the Act impact private investors and multi-family housing providers?

Federally Backed Mortgage and Multi-Family Mortgage Loans

Federally backed mortgage loans are secured by a lien on a residential property and which are made or insured by the federal government. They also include loans made or insured as part of a HUD housing or urban development program or those which Fannie Mae or Freddie Mac purchase or securitize.

Federally backed multi-family mortgage loans are the same as federally backed mortgage loans but are for residential properties that are designed for families of five (5) or more.

Mortgage Foreclosure Moratorium on Federally Backed Mortgage Loans

The Act prohibits servicers of federally backed mortgage loans from initiating the foreclosure process. This prohibits not just the filing of a foreclosure complaint but also serving notice and proceeding with current, pending litigation.  For all pending foreclosure litigation, the plaintiff is unable to seek entry of a judgment for foreclosure and sale, enforce a foreclosure and sale judgment by auctioning the property for sale, or obtain or enforce an order of possession. This provision is effective 60 days from March 18, 2020 and does not apply to abandoned or vacant properties.

To be sure, this provision only affects servicers whose loans are federally backed and has no impact upon foreclosure of liens related to assessments or common expenses.

Assistance for Multifamily Borrowers Who Have Federally Backed Mortgage Loans

The Act recognizes that multifamily borrowers with federally backed multifamily mortgage loans (“Multifamily Borrowers”) may be impacted financially due to the COVID-19 pandemic. Under the Act, Multifamily Borrowers who experience such hardship will be able to request a forbearance. However, those who receive a forbearance are prohibited from (a) initiating evictions or evicting tenants based upon non-payment of rent or other charges; and (b) charging late fees (or other fees) related to a tenant’s late rent payment. The prohibitions are effective during the term of the forbearance.

Eviction Moratorium
The Act also contains imposes a certain moratorium on initiating the eviction process to recover possession due to non-payment of rent from tenants. This applies to residential dwellings that are tenant-occupied designed for one (1) or more families and also fall under (a) a covered housing program under Section 41411(a) of the Violence Against Women Act of 1994; (2) the rural housing voucher program under Section 542 of the Housing Act of 1949; or (3) have either a federally backed mortgage or multifamily mortgage loan (“Lessors”).

The moratorium is effective as of today, March 27, 2020 and is effective for another 120 days. During the moratorium, Lessors are prohibited from serving notices of termination of tenancy for non-payment of rent (“Notice”). Once the moratorium has expired, Lessors are required to afford tenants at least 30 days to vacate after service of the Notice. This provision supercedes the terms of the lease or state or local law. Additionally, Lessors are prohibited from filing eviction actions predicated upon non-payment of rent or other charges during the moratorium.

Please feel free to contact our office for counseling and advice on the Act.