The federal CARES Act, signed by president Trump on March 27, 2020, created numerous restrictions on owners of residential dwellings that have federally backed mortgages.
What is the difference between a federally-backed mortgage and a conventional mortgage?
CARES Act restrictions only apply to landlords with mortgages that are federally backed. A federally backed mortgage is a loan subsidized or insured by the federal government which protects lenders against defaults on payments.
The most common types of federally backed mortgages are FHA and VA mortgages.
Conventional mortgages are not directly insured by the Federal Government because they are backed by Fannie Mae and Freddie Mac, which are not government organizations.
(They are currently under conservatorship under the direction of the Federal Housing Finance Agency, so I’m not sure if they will be considered “federally backed” under the CARES Act.)
Under the CARES Act, during the first 120 days, beginning on the enactment of the act, landlords with federally backed mortgages are prohibited from:
- Issuing a notice to vacate to a tenant;
- Filing an eviction action in court for nonpayment of rent; and
- Charging tenants fees, penalties or charges related to the non-payment of rent.
The act also requires landlords to give tenants 30 days to vacate the property after serving them with a notice to vacate. This notice cannot be given to the tenant until after the 120 day period is over.
How do I know if my mortgage is federally-backed?
If a landlord is unsure if their mortgage is federally backed, the easiest way to find out is to contact the servicer (or person who collects their mortgage payments). There are also numerous lookup sites that can help verify if a loan is federally backed.
If a landlord does not have a mortgage on their property or does not have a federally backed mortgage, these restrictions do not apply.
What else do landlords need to know?
The good news for landlords with mortgages is that they might be able to apply for a forbearance program. These programs can allow a landlord to skip or make reduced mortgage payments.
The CFPB (Consumer Financial Protection Bureau) has some great information that can help landlords figure out what options are available.
The availability of these programs depends on the type of loan and the policy of the bank or company collecting the payments.
If a landlord applies for a forbearance program, it is very important to get written confirmation of exactly what the agreement is.
Landlords may also be able to find some relief from SBA Coronavirus Relief Options. The guidelines for these Federal programs are changing by the minute, so it does not hurt to explore them and see what is available.
If you’re not sure how you’re being affected by COVID-19 and the CARES Act, contact us at Adam Diamond Law today. We hope that you will stay safe, stay healthy, and stay home (if you can).