Home is Wherever I’m with You: How COVID-19 Relief Affects Homeowners, Renters, and Residential Landlords
By Vela Wood
“How do you shelter in place without a roof over your head?” Millions of Americans impacted by layoffs, furlough, and the economic downturn caused by COVID-19 are asking themselves this question as rent and mortgage payments loom near. Thanks to the passage of the CARES Act (the Coronavirus Aid, Relief, and Economic Security Act), many will find, at least temporary, relief.
Homeowners May Benefit the Most from Mortgage Forbearance
The vast majority of homeowners within the United States are eligible to benefit from COVID-19 relief through forbearance of mortgage payments and moratoriums on eviction.
How Does It Work?
Any homeowner with a federally backed mortgage – generally those mortgages backed by Fannie Mae or Fannie Mac – can get mortgage forbearance for a minimum of 180 days and up to 360 days by simply asking their loan servicer for relief because of financial hardships during the COVID-19 emergency. But unlike normal circumstances where a borrower would incur additional fees, penalties, and expenses for a missed a mortgage payment, during the forbearance period, homeowners will not owe any amounts outside their normal mortgage costs.
Homeowners can request this relief regardless of whether their mortgage was delinquent before the CARES Act and without fear of a missed payment being reported to a credit agency during the forbearance period.
While those with non-conforming loans, more popularly known as jumbo loans or jumbo mortgages, do not qualify; homeowners “are eligible for forbearance regardless of whether their property is owner occupied, a second home or an investment property.” This is a huge boon to the owners of rental properties on platforms like AirBnb, who have seen reservations plummet as a result of cancelled spring breaks, a grounded workforce, and postponements of events.
As an additional protection for homeowners, mortgage servicers of federally backed loans are prohibited from beginning any foreclosure proceeding until at least May 17, 2020 – a date that may be extended further as the effects of COVID-19 become more apparent.
Renters receive some of the benefits from COVID-19 relief as well. For a 120-day period, renters of one to four family residential properties with federally backed mortgages are protected from any eviction proceedings and cannot be charged fees or penalties on unpaid rent.
Unlike single-family homeowners, multifamily owners – borrowers with a federally backed mortgage for a property with five or more units – face more hurdles and formalities for COVID-19 relief. While the mechanics for relief are relatively similar to that of homeowners, multifamily owners are only eligible if they were current on mortgage payments as of February 1, 2020. Delinquent payers need not apply. Moreover, the forbearance period is dramatically lower – an initial 30-day period followed by two 30-day extensions – for a total of 90 days’ forbearance.
What Does This Mean for Renters?
During the mortgage forbearance period, including any extensions, some multifamily renters are protected. Multifamily owners cannot evict or start the eviction process against any tenants until 30 days after the forbearance period ends nor charge fees or penalties related to unpaid rent. Unfortunately, tenants in multifamily properties that are not subject to a federally backed mortgages – because those properties were paid for in cash or used alternative financing – will receive no federal relief; however, they may have a safety net from eviction proceedings based on state or local ordinances.
No relief or stimulus program is perfect, but mortgage forbearance, eviction moratoriums, and elimination of late fees will create some much-needed breathing room for homeowners and renters alike.
The elephant in the room though is that mortgage forbearance is not the same as mortgage forgiveness. At the end of the forbearance period, unless other arrangements are made, all the money owed becomes due. While the CARES Act certainly helps, is it enough for long enough? Only time will tell.