COVID-19 Task Force E-lert: The CARES Act: Foreclosure/Eviction Moratorium and Mortgage Loan Forbearance

Of the many forms of relief provided in the Coronavirus Aid, Relief, and Economic Security (CARES) Act, several provisions provide immediate but temporary protections impacting homeowners and lenders.

The CARES Act Moratorium on Foreclosures: Section 4022 of the CARES Act, entitled “Foreclosure Moratorium and Consumer Right to Request Forbearance,” provides foreclosure relief for “federally-backed loans,” which is defined as loans (for 1–4 family properties) purchased, securitized, owned, insured, or guaranteed by Fannie Mae or Freddie Mac, or owned, insured, or guaranteed by FHA, VA, or USDA. See § 4022(a)(2).

Under the CARES Act, a servicer of federally backed mortgage loan may not: initiate any judicial or nonjudicial foreclosure process, move for a foreclosure judgment, order a sale, or execute a foreclosure-related eviction or foreclosure sale. There is an exception for vacant or abandoned property. The provision lasts for not less than the sixty-day period beginning on March 18, 2020. This provision is not limited to borrowers with a COVID-19 related hardship. See § 4022(c)(2).

The CARES Act Forbearance Rights for Single or Multi-Family Properties less than five units: Under the CARES Act, homeowners with federally backed mortgage loans affected by COVID-19 can request and obtain forbearance from mortgage payments for up to 180 days, and then request and obtain additional forbearance for up to another 180 days. This is regardless of delinquency status. During a period of forbearance, no fees, penalties, or interest shall accrue on the borrower’s account beyond the amounts scheduled or calculated as if the borrower made all contractual payments on time and in full under the terms of the mortgage contract. The covered period appears to be during the emergency or until December 31, 2020, whichever is earlier. See § 4022(b), (c)(1).

The CARES Act Forbearance Rights for Multi-Family Properties (five or more units) and Rights of Their Tenants: The Act provides for different forbearance rights for owners of multi-family property, and also provides that tenants are protected from eviction if the owner seeks such forbearance. See CARES Act § 4023. It should be noted that multifamily borrowers have to be current on their payments as of February 1, 2020 to seek forbearance, and the forbearance is only available for mortgage payments up to 30 days, and then the multifamily borrower can request 2 additional 30-day forbearance periods.

The CARES Act Protections Against Eviction: During the 120-day period beginning on the Act’s March 27, 2020 enactment date, the lessor of a “covered dwelling” may not file a court action for eviction or charge additional fees for nonpayment of rent. See CARES Act § 4024(b). After that 120-day period, the lessor cannot require the tenant to vacate until it gives the tenant a thirty-day notice to quit. See § 4024(c). A covered dwelling is one where the building is secured by a federally backed mortgage loan or participates in certain federal housing programs. See § 4024(a).

Note: A large number of governors and local governments have also initiated suspensions of all residential evictions in their jurisdictions. A state-by-state list of eviction/foreclosure moratoria is published by the National Housing Law Project¹ and can be viewed here.

[1] The research is being conducted by Emily A Benfer, Visiting Associate Clinical Professor of Law and Director of the Health Justice Advocacy Clinic at Columbia Law School. Students from Columbia University and the University of Pennsylvania are providing pro bono research assistance.