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COVID-19: CARES Act & Mortgage Forbearance for Borrowers with Federally-Backed Mortgages

While the CARES Act imposes an eviction moratorium on landlords of “covered properties” the Act is not without relief to landlords. Landlords/borrowers with “federally backed mortgage loans” or  “federally backed multi-family mortgage loans” are entitled to monthly mortgage payment forbearance for up to 90 days.

Section 4022 (1-4 family mortgage loans) and Section  4023 (5+ family mortgage loans)  of the CARES Act provide some relief to multi-family borrowers. To qualify,  a borrower/landlord must fall into any of the below categories:

  1. Borrowers with “Federally Backed Mortgage Loan” meaning, a 1-4 family property with mortgage bought by Fannie/Freddie (above) or involving FHA, VA or other related federal agency. This is the overwhelming majority of 1-4 family mortgage loans. Or;
  2. Borrowers with “Federally Backed Multi-Family Mortgage Loans.” A “federally backed multi-family mortgage loan is a mortgage “ (a) secured by a 5 family or greater property AND (b) is made in whole or in part, or insured, guaranteed, supplemented, or assisted in any way, by any officer or agency of the Federal Government or under or in connection with a housing or urban development program administered by the Secretary of Housing and Urban Development or a housing or related program administered by any other such officer or agency, or is purchased or securitized by the Federal Home Loan Mortgage Corporation or the Federal National Mortgage Association.”

Landlords with mortgages issued or held by banks  (and not a hard money lender or entity which is not regulated by the NJ Department of Banking and Insurance) are likely to qualify for this assistance. To determine whether a loan is “purchased or securitized” by Fannie or Freddie a landlord should contact its loan’s servicing entity and ask that specific question.

If the loan is a “federally backed mortgage loan” or a “federally backed multi-family mortgage loan” then the borrower/landlord can request a 30-day payment forbearance. This forbearance can be renewed for two 30 day intervals, totaling 90 days of forbearance. The request can be made orally or in writer to the loan’s servicer.

A landlord of a Covered Property who qualify should seriously consider taking advantage of the forbearance described above. The only decision making is whether to trigger the forbearance beginning April 2020 or May 2020. Depending on individual rent-roll and its performance, it may be best to trigger the forbearance beginning May 2020 thereby covering May, June, July 2020 (until the eviction moratorium concludes).

Offit Kurman, P.A., maintains a broad-based landlord and property owner representation practice. In New Jersey, Offit Kurman represents landlords and property managers in maximizing return, resolving disputes and avoiding unnecessary and costly delays. The Firm’s New Jersey geographic practice area includes: Jersey City, Hoboken, Bayonne, Hudson County, Newark, Essex County, Woodbridge, Middlesex County, Paterson, Passaic County, Hackensack, Bergen County and other points across New Jersey