Three sections of the CARES Act signed by president Trump on March 27th define how mortgage forbearances, foreclosures and evictions are to be handled during the covid-19 outbreak. This is a summary of those sections. We are providing this information so that owners of rental properties can maximize resources during these trying times. This article is not intended to be legal advice in any way. If you have questions about how the CARES Act will affect your situation seek legal advice from an attorney. The text of the law can be found at the following link:
Section 4022 – 1 to 4 Family Properties:
Section 4022 covers 1 to 4 family units. It’s explains the terms for forbearance. There were no stipulations for evictions in this section.
Included are single family dwellings that are part of a larger structure that contains more than one single family unit. Examples would be occupant owned apartments or condominiums.
If any loan on a 1 to 4 family structure has anything to do with the federal government it’s covered by section 4022.
The borrower of a mortgage may request forbearance if they are experiencing direct or indirect hardship due to the COVID-19 outbreak regardless of delinquency status. It requires no form of proof other than the borrower’s assurance that they are experiencing a hardship. The request for forbearance must be made form March 27, 2020 to either the declared end of the national emergency or December 31, 2020.
The servicer of the loan must grant an initial forbearance of up to 180 days with no interest or penalties other than those that would be charged normally if the mortgage was being paid on time. An additional 180 days may be requested and if the borrower wished either 180 day period may be shortened.
Section 4023 – 5+ Family Properties:
A 5+ unit borrower of a mortgage with a federally backed loan may ask for an initial 30 day forbearance either in written or oral form as long as the borrower was current on the loan as of February 1st. The borrower can be either directly or indirectly experiencing a financial hardship resulting from the COVID-19 outbreak.
The loan servicer has to document the borrower’s financial hardship, provide forbearance for up to 30 days and extend forbearance for 2 additional 30 day periods as long as the borrower asks again for forbearance at least 15 days prior to the end of the current forbearance period. The borrower may discontinue the forbearance at any time.
The landlord may not charge any late fees, penalties or other charges for late payment of rent and the landlord may not evict a tenant for only nonpayment of rent or any other fees.
The landlord may not issue a notice to vacate until after the forbearance has expired and can’t require a tenant to vacate for 30 days after a notice to vacate has been issued.
Section 4024 – Temporary Moratorium on Eviction Filings
For 120 days after March 27th a landlord can’t file for an eviction because a tenant didn’t pay rent or fees. Also, a landlord can’t charge any fees having to do with nonpayment of rent.
The landlord may not require the tenant to vacate any sooner than 30 days from the date of notice of eviction and the landlord may not issue a notice to vacate during the moratorium.
Use this basic rundown to form a framework to work in. We hope this text gives you an idea of what changes this new law has created. Stay well.
(Again, this article in no way forms legal advice nor is it intended to be an authoritative or professional translation of any law. Seek legal counsel before making any decisions.)