March 25, 2020

Relief for Commercial Real Estate Investors and Tenants Impacted by COVID-19

Holland & Knight Alert
Andrew J. Starrels

The Federal Housing Finance Agency (FHFA) took action on March 23, 2020, to address the impacts felt by some commercial real estate investors from the COVID-19 crisis. The FHFA announced that it will grant some leniency to multifamily landlords impacted by the spread of the virus – with conditions.

Owners of multifamily properties subject to Fannie Mae- and Freddie Mac-backed mortgages (which are regulated by the FHFA) will be permitted to fall behind on their mortgage payments as long as they do not evict renters who are unable to pay their rent due to the COVID-19 outbreak. According to the FHFA's press release, the benefit is available to mortgages that are "negatively affected by the coronavirus national emergency." Fannie Mae and Freddie Mac are the nation's largest mortgage financers, making this action significant and one that will be felt by millions of property owners and commercial real estate investors across the country. The FHFA is working to carry out this proposal immediately.

Previously, the FHFA had announced that Fannie Mae and Freddie Mac would allow owners of single-family residences to suspend their mortgage payments for up to 12 months without incurring late fees. Such borrowers need to demonstrate financial hardship due to COVID-19 to obtain this relief but do not need to have contracted the new coronavirus themselves. Freddie Mac announced that its borrowers are eligible for forbearance regardless of whether their property is owner-occupied, a second home or an investment property.

Additionally, under the direction of the FHFA, Fannie Mae and Freddie Mac will suspend evictions and foreclosures under single-family mortgages for at least 60 days. Specifically, the FHFA eviction and foreclosure moratorium applies to homeowners that participate in FHA-insured Title II Single Family forward and Home Equity Conversion mortgage programs. Similarly, the U.S. Department of Housing and Urban Development (HUD) has acted to suspend evictions and foreclosures through April 2020. HUD has directed its mortgage servicers to "halt all new foreclosure actions and suspend all foreclosure actions currently in process; and cease all evictions of persons from Federal Housing Administration (FHA)-insured single-family properties."

FHFA Director Mark Calabria expressed the hope that the multifamily forbearance incentive for landlords to postpone evictions will bring peace of mind to millions of families who are struggling due to the outbreak. National Multifamily Housing Council (NMHC) President Doug Bibby welcomed the FHFA action, indicating in a statement, "This crisis is testing all of us – every industry, every family. No one should lose the roof over their head in a pandemic." Last week, the NMHC urged the multifamily industry to adopt principles to aid renters through the crisis, including halting evictions and rent increases, creating payment plans for impacted tenants and response plans for potential COVID-19 exposure.

The substantial moves being made by government agencies and industry groups in response to the pandemic's impact on the real estate industry are backstopped by the desire to keep individuals in their homes during the national emergency.

Holland & Knight's California COVID-19 Team

For legal assistance regarding COVID-19 topics, please contact our California COVID-19 Team, which includes Holland & Knight attorneys Jennifer Hernandez, Letitia Moore, Bradley Brownlow, Nicholas Targ, Andrew Starrels and Ryan Leaderman.

DISCLAIMER: Please note that the situation surrounding COVID-19 is evolving and that the subject matter discussed in these publications may change on a daily basis. Please contact the author or your responsible Holland & Knight lawyer for timely advice.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.

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