As part of the federal government COVID-19 economic mitigation response, the Federal Housing Finance Authority (FHFA) has announced that Fannie Mae and Freddie Mac will offer mortgage forbearance to multifamily property owners affected by the COVID-19 pandemic with the condition that they suspend evictions for renters who can’t pay rent due to the pandemic.
The forbearance is available to all multifamily properties with a Fannie- or Freddie-backed mortgage. More details are provided below:
Generally:
- Borrowers will be offered a 90-day/3-month forbearance during which time, the borrower will not be obligated to pay principal, interest or escrow contributions (the previously required monthly payment).
- Additionally, during this time, there will be no late fees assessed to the loan and no interest charged to the borrower.
- At the expiration of the forbearance period, the forborne amounts will be required to be repaid through 12 equal installments
When can borrowers take advantage of this program?
- Borrowers have between April 1, 2020 until August 1, 2020 to commence the forbearance agreement.
- Freddie Mac will not offer this program to non-performing loans. Loans considered to be delinquent prior to April 1, 2020 with respect to payments, tax or insurance obligations, or other performance related matters are not considered eligible to participate.
What does a borrower need to provide to take part?
- A “Hardship Letter” or the like expressing real challenges in making timely payments. A borrower must evidence an inability to make payments (realized or anticipated) in order to qualify.
- A Delinquency Report or a current rent roll outlining units that have vacated due to the current pandemic or are expected to vacate/not pay due to the pandemic.
- Other information may be requested to support the Hardship Letter.
Other:
- Fannie Mae borrowers will be required to execute a pre-negotiation letter with Fannie Mae.
- The forbearance agreement contains language outlining that if a borrower enters into the agreement, that they will not evict tenants for non-payment for 90-days after the forbearance agreement effective date. Fannie Mae guidance includes the longer of 90-days after the forbearance agreement effective date, or until the mortgage loan is brought current.
- The forbearance agreement is non-negotiable. If a borrower does not wish to comply with any part of the agreement, then they are not eligible.
- If, after the 90-days/3-months, any borrower requires additional forbearance, Fannie Mae and Freddie Mac will need to collect additional information in consideration of that need.
This alert does not purport to be a substitute for advice of counsel on specific matters.
Harris Beach has offices throughout New York state, including Albany, Buffalo, Ithaca, Long Island, New York City, Rochester, Saratoga Springs, Syracuse and White Plains, as well as New Haven, Connecticut and Newark, New Jersey.
