The ongoing economic crisis resulting from COVID-19, as well as the passing of eviction moratoria by the Governor and many local jurisdictions, has created a number of financial issues for rental property owners. While large corporate property owners can often absorb the loss of rent for a short period of time, it can be a substantial hardship for noncorporate owners. This guide is meant to serve as a resource for California REALTORS® who are rental housing property owners seeking emergency financial assistance during this time of uncertainty.
For guidance on state and local eviction and rent moratoria, as well as other rental housing issues related to the COVID-19 pandemic, please read C.A.R.’s Legal Q&A on COVID-19 Landlord Issues. Also, all of the information provided below entails dealing with your loan servicers. Please note that the demand for information, coupled with the personnel issues created by Covid-19, will likely require waiting on hold, or for an email reply, for long periods of time.
Federal Assistance
What type of assistance is available for a rental property owner under the federal
Coronavirus Aid, Relief, and Economic Security (CARES) Act?
The CARES Act requires servicers of federally owned or backed mortgages to grant forbearances to single- and multifamily rental property owners who suffer economic hardship due to the COVID-19 crisis.
What type of loan must I have to qualify for mortgage forbearance under the CARES Act?
To be eligible for forbearance assistance under the CARES Act, your mortgage loan must be federally owned or backed by one of the federal agencies and entities listed below. If you do not know who owns or backs your mortgage loan, please call your servicer. Your servicer has an obligation to provide you, to the best of its knowledge, the name, address and telephone number of who owns your mortgage loan. (If you do not have a federally owned or backed mortgage loan, you may still qualify for mortgage forbearance under state law, which is detailed in Section II of this document.)
List of federal agencies and entities:
- Fannie Mae
- Freddie Mac
- Federal Housing Administration
- U. S. Department of Agriculture
- U.S. Department of Housing and Urban Development
- U.S. Department of Veterans Affairs
- USDA Direct
- USDA Guaranteed
What qualifies as a “single-family” property for purposes of the foreclosure moratorium and the borrower’s right to request forbearance?
For these purposes, “single-family” means homes designed for one to four families.
How do I request mortgage forbearance as a single-family rental housing property owner?
A single-family rental property owner with a federally owned or backed mortgage loan may request forbearance directly through their loan servicer. Upon making the request, the rental property owner must affirm they are experiencing an economic hardship due to the COVID-19 crisis. Aside from this affirmation, the loan servicer may not require the rental property owner to provide any additional documentation to facilitate the forbearance request.
How do I request mortgage forbearance as a multifamily (five or more dwelling units) rental housing property owner?
The same requirements apply to multifamily rental property owners as specified in A3 above, with a few caveats. As a condition of any mortgage-payment forbearance request, a multifamily property owner must have been current on mortgage payments as of February 1, 2020. A multifamily property owner also has the option of making an oral or written forbearance request.
Please note: Multi-family rental property owners who receive forbearance assistance under the CARES Act may not evict – or even initiate an eviction of – a tenant solely for nonpayment of rent or other fees or charges. Even without the forbearance, the CARES
Act provides a 120-day moratorium on evicting a tenant for nonpayment of rent (see Q11 below); additionally, you may have stricter standards in your local area. For what period of time may I request forbearance on my single-family rental property?
The length of the forbearance is dictated by your request. An initial forbearance may not last longer than 180 days, but you may request to extend the period by an additional 180 days. You may also request a shorter forbearance period.
For what period of time may I request forbearance on my multifamily rental property?
The forbearance period is shorter for multifamily rental property owners. A forbearance may not initially last longer than 30 days. However, you may request to extend this period twice, each time for an additional 30 days. Any extension request must be made during the “Covered Period” (see below) and at least 15 days prior to the end of the current forbearance period. Please note that multifamily property owners may discontinue a forbearance at any time.
* The term “Covered Period” means the period between the enactment of the CARES Act and whichever of the following occurs earlier: (1) the end of the national COVID-19 emergency, or (2) December 31, 2020.
Will I accrue interest, fees and/or penalties during forbearance?
During a forbearance under the CARES Act, the accrual of interest and the imposition of fees and penalties are permitted, but only if they are consistent with the existing loan documents. However, no additional interest, fees and/or penalties are permitted.
Will forbearance negatively impact my credit score?
No. If you are granted forbearance during this temporary period, you will not have derogatory information related to those deferred mortgage payments reported to credit reporting companies.
Is there anything in the CARES Act regarding foreclosures?
Foreclosures are prohibited from March 18, 2020, through May 17, 2020. Specifically, a servicer may not initiate any judicial or non-judicial foreclosure process, move for a foreclosure judgment or order of sale, or execute a foreclosure-related eviction or sale. However, a servicer may foreclose on a vacant or abandoned property.
Is there anything in the CARES Act regarding evictions?
Yes. Regardless of whether a rental property owner has requested a forbearance, the CARES Act imposes a 120-day moratorium on tenant eviction filings and charging late fees for any property secured by a “federally backed” loan for both “single-family” and “multifamily” properties. Between March 27, 2020, and July 24, 2020, (the 120-day period), owners of properties with covered loans may not make any filing to recover possession of the above properties from a tenant for nonpayment of rent or other fees or charges, and may not charge fees, penalties or other charges to the tenant related to nonpayment of rent. Notice that this nonpayment of rent is not necessarily related to nonpayment due to a COVID-19-related circumstance.
Additionally, rental property owners may not require tenants to vacate sooner than 30 days after providing notice to vacate, and they may not issue a notice to vacate until after July 24, 2020. This last provision makes no reference to nonpayment of rent or any other violation of the lease. Its meaning is unclear, but it likely means that a rental property owner is not entitled to evict without cause during the 120-day period.
State Assistance
Before we talk about assistance, didn’t California institute a residential eviction moratorium?
California has issued a statewide moratorium on residential evictions for tenants who are unable pay their rent due to the economic hardships related to COVID-19. This moratorium went into effect on March 27, 2020, and is currently valid through May 31, 2020. Local governments may adopt ordinances containing stricter standards. For example, the City of Los Angeles, in addition to its local eviction moratorium, has adopted a “rent freeze,” which applies to rental properties regulated by its Rent Stabilization Ordinance.
What financial assistance is being coordinated by the state?
In coordination with the State of California, Citigroup, JP Morgan Chase, US Bank, Wells Fargo and close to 200 state-chartered banks, credit unions and servicers have committed to providing relief for single- and multifamily rental property owners in California. Rental property owners who are struggling due to the COVID-19 crisis may be eligible for a 90-day grace period for all mortgage payments. A list of contact information for these financial institutions may be viewed by clicking here.
What does this 90-day grace period entail?
The above financial institutions are offering mortgage-payment forbearance for up to 90 days, which allows rental property owners to reduce or delay their monthly mortgage payments. This includes providing you: 1) a streamlined process for requesting forbearance due to the COVID-19 crisis, supported with available documentation; 2) a confirmation of approval of, and the terms of, the forbearance; and 3) the opportunity to extend your forbearance if you continue to experience hardship due to the COVID-19 Crisis.
How may I obtain this assistance?
For more information and details on how to apply for available relief, you should contact and work directly with your mortgage loan servicer.
Will this grace period last longer than 90 days?
The above financial institutions have, for the time being, currently committed to 90 days of assistance, but further commitments may be worked out between the state and these institutions if the COVID-19 crisis continues to worsen.
Will I have to pay fees and charges during this 90-day grace period?
For at least 90 days, the above financial institutions will waive or refund mortgage-related late fees.
What effect will this assistance have on my credit score?
Financial institutions will not report derogatory information (e.g., late payments) to credit reporting agencies, but may report a forbearance, which typically does not alone negatively affect a credit score.
What if I already made a mortgage payment or was charged a late fee because of COVID-19?
These state measures went into effect on March 25, 2020.
What about foreclosures?
Financial institutions will not start any foreclosure sales or evictions during the forbearance.
What if my financial institution isn’t offering this assistance?
At this time, Citigroup, JP Morgan Chase, US Bank, Wells Fargo and close to 200 state-chartered banks, credit unions and servicers are supporting these commitments. Additional financial institutions may make these commitments in the upcoming days and weeks.
What if my mortgage servicer is not communicative or cooperative?
You can file a complaint with the Department of Business Oversight (DBO) through the complaint form on the its website (https://dbo.ca.gov/file-a-complaint/) or by contacting the DBO Consumer Services Office at (866) 275-2677 or (916) 327-7585 or via email at Ask.DBO@dbo.ca.gov.
The information contained herein is believed accurate as of March 31, 2020. It is intended to provide general answers to general questions and is not intended as a substitute for individual legal advice. Advice in specific situations may dif er depending upon a wide variety of factors. Therefore, readers with specific legal questions should seek the advice of an attorney.
Copyright© 2020 CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.). Permission is granted to C.A.R. members to reprint this material in hardcopy or PDF format only for personal use or with individual clients. This material may not be used or reproduced for commercial purposes. Other reproduction or use is strictly prohibited without the express written permission of C.A.R.’s Legal Department. All rights reserved.
Source: https://www.carcovidupdates.org/relief-faq-rental-owners