On March 27, 2020, the President signed into law the Coronavirus Aid, Relief and Economic Security (CARES) Act (Senate Amendment to H.R. 748.
This $2 trillion bill provides financial aid to individuals, businesses, nonprofits, and state and local governments. It does not contain significant provisions relating to community development or affordable housing, but members of Congress have indicated that a fourth COVID-19 relief package may do so.
The CARES Act does have some provisions that may impact some multifamily operators. A brief description of those follows.
§2301. EMPLOYEE RETENTION CREDIT FOR EMPLOYERS SUBJECT TO CLOSURE DUE TO COVID-19: This section applies only to employers that are forced to close or suspend operations due to orders from a governmental authority. This provision will not have substantial impact on the multifamily housing community.
§2302. DELAY OF PAYMENT OF EMPLOYER PAYROLL TAXES: Employers may defer payment of payroll taxes. Beginning on the date of the Act, March 27, 2020, 50% of payroll tax will be due on December 31, 2021 and the remaining 50% shall be due on December 31, 2022. All employers should discuss this with their accountants to determine specific applicability.
§4023. FORBEARANCE OF RESIDENTIAL MORTGAGE LOAN PAYMENTS FOR MULTIFAMILY PROPERTIES WITH FEDERALLY BACKED LOANS: This provision applies to borrowers with multifamily properties with a federally backed mortgage loan experiencing a financial hardship due, directly or indirectly, to the COVID-19 emergency.
- A multifamily borrower with a federally
backed multifamily mortgage loan that was current on its payments as of
February 1, 2020, may submit an oral or written request for forbearance to the
borrower’s servicer affirming that the multifamily borrower is experiencing a
financial hardship during the COVID-19 emergency.
- Once the request is received, the servicer
- Document the financial hardship;
- Provide the forbearance for up to 30 days; and
- Extend the forbearance for up to two additional 30-day periods upon the request of the borrower provided that, the borrower’s request for an extension is made during the covered period, and, at least 15 days prior to the end of the current forbearance period.
- The borrower has the right to discontinue the forbearance at any time.
- Once the request is received, the servicer shall
- RENTER PROTECTIONS DURING FORBEARANCE
PERIOD: if a borrower receives a forbearance, the borrower may not, for the
duration of the forbearance –
- Evict or initiate the eviction of a tenant from a dwelling unit located in or on the applicable property solely for nonpayment of rent or other fees or charges; or
- Charge any late fees, penalties, or other charges to a tenant for late payment of rent.
- A borrower that receives a forbearance under this section (1) may not require a tenant to vacate a dwelling unit on the property before the date that is 30 days after the date on which the borrower provides the tenant with a notice to vacate; and (2) may not issue a notice to vacate until after the expiration of the forbearance.
- Properties affected by this are those with either direct federal loans or mortgage insurance.
- This provision will end on the sooner of (1) the termination date of the COVID-19 national emergency; or (2) December 31, 2020.
- This provision does not apply to LIHTC properties unless they have a federally backed loan.
As noted above, future legislation relating to COVID-19 is likely to have a more significant impact on the affordable housing industry, but such legislation is unlikely before late April or May.