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Mortgage Forbearance under the CARES Act

By Gary Ganchrow, Parker, Milliken, Clark, O’Hara & Samuelian, a Prof. Corp.

I received several questions last week about potential relief for property owners (especially in light of the need to accommodate tenants under the emergency laws), so I believe the synopsis below may be of interest to you.  It is not intended to be legal advice for your particular situation.

As you probably know, President Trump signed into law last Friday the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).

Under section 4022 of that Act, consumer borrowers with federally backed mortgages on properties designed principally for the occupancy of 1 to 4 families can receive a 180-day loan forbearance (plus up to an additional 180 days upon request) by affirming that they are experiencing a financial hardship directly or indirectly related to COVID-19.  During this time, no fees, penalties, or interest will accrue beyond the amounts scheduled or calculated as if the borrower made all contractual payments on time and in full.

Under section 4023, consumer borrowers with federally backed mortgages that were current as of February 1, 2020 on properties designed principally for the occupancy of 5 or more families can receive a forbearance ending either on the termination date of the national emergency or December 31, 2020 – whichever is sooner.  The forbearance is for up to 30 days initially, but can be extended for two more 30 day periods as long as the borrower timely requests.   A borrower that receives such a forbearance may not, for the duration of the forbearance, evict or initiate the eviction of any tenant for nonpayment of rent, or charge any late fees, penalties, or other charges for late payment of rent. The borrower also cannot require a tenant to vacate until at least 30 days after the date on which the borrower provides the tenant with a notice to vacate.

In general, under the CARES Act, lessors may not initiate a legal action between March 27, 2020 and July 25, 2020 to recover possession from a tenant for nonpayment of rent or other fees or charges, or charge fees or penalties to the tenant related to nonpayment of rent.  This prohibition is distinct from the provisions in Section 4023 mentioned above.

Gary Ganchrow, Attorney-at-Law
Parker, Milliken, Clark, O’Hara & Samuelian, a Prof. Corp.
tel.  (213) 683-6535