As the coronavirus and COVID-19 crisis continues to develop in the United States, Freddie Mac Multifamily (“Freddie Mac”) and Fannie Mae have responded quickly to assist impacted borrowers, properties and their tenants. Both government agencies have a strong history of providing forbearance relief to their borrowers during periods of crisis and adopted similar programs immediately after Hurricane Harvey, Florence and Michael. Unlike the Hurricane Disaster Relief programs, the COVID-19 Relief programs are not restricted by FEMA designated affected counties, but rather are available to all borrowers who can demonstrate hardship as a consequence of the COVID-19 pandemic. This relief furthers the growing trend of governmental action providing temporary protections of tenancies at the national, state and local level.
Freddie Mac and Fannie Mae have implemented programs to offer forbearance for any loans secured by real property affected by the economic and regulatory impacts of COVID-19. Generally, a loan must be otherwise in good standing to be eligible for such relief. If forbearance is granted, certain monthly payment obligations will be postponed and the lender will not exercise rights and remedies in connection with any missed payments due to COVID-19 during the forbearance period. Under the forbearance program, a borrower must not evict a tenant as a result of such tenant’s hardship resulting from the COVID-19 pandemic.
We anticipate that Freddie Mac and Fannie Mae, directly and through their primary and master servicers, will receive numerous relief requests which will be difficult to deny with a reasonable demonstration of hardship during this emergency.
One of the primary goals of the above forbearance relief programs is to allow adequate time for the thousands of multifamily property owners to determine the extent to which COVID-19 will affect their properties and operations. Property owners may find themselves navigating complex and congested business income insurance coverage issues. Servicers should consider taking inventory of the existing insurance on affected properties, as well as its rights and responsibilities under the loan documents with respect to such claims.
Additionally, due to local “Stay at Home” orders and general social distancing practices, most borrowers are not in a position to comply with inspection requirements and the servicers are in the process of deferring inspection requirements for certain properties. Borrowers are encouraged to contact their servicers.
In order to expedite any request for a forbearance under the above programs, Borrowers should submit a written response to their loan servicer and include the following additional information: (i) a hardship letter, explaining the tenant profile and current or anticipated inability to pay, (ii) occupancy statistics for the property, (iii) a rent roll report identifying delinquent tenants (if available), and (iv) any other information relevant to a COVID-19 forbearance analysis.
For more information about this alert, please contact Tia Cottey in our Phoenix office (firstname.lastname@example.org, 602-364-7012), Paul Donohue in our Charlotte office (email@example.com, 704-749-8949), or Amy Simpson in our Dallas office (firstname.lastname@example.org, 214 721 8043).
This document provides a general summary and is for information/educational purposes only. It is not intended to be comprehensive, nor does it constitute legal advice. Specific legal advice should always be sought before taking or refraining from taking any action.