CARES Act – Deferral of Mortgage Loan Payments for Apartment Buildings with Government Supported Loans | Kilpatrick Townsend & Stockton LLP

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The federal CARES Act contains several provisions to help borrowers of government-sponsored multi-family mortgage loans who are in financial distress due to COVID-19. A copy of the current legislation can be found here – the provisions for small business are in Subtitle A, Title IV – Coronavirus Economic Stabilization Act of 2020. Below is a summary of the most important provisions.

  • The CARES Act requires a federal multi-family mortgage borrower who (A) was up to date with their payments as of February 1, 2020 and (B) confirms that they are in a financial state due to the COVID-19 emergency Are distress, an application can be forbearance from credit service providers.
  • The CARES Act provides that a servicer grant a deferral of up to 30 days after receiving a request that meets the above requirements. The deferral can be extended by up to two further 30-day periods, provided that the extension requests are made during the “covered period” and at least 15 days before the expiry of the current deferral period.
  • The deferral period can be ended at any time at the request of the borrower.
  • A multi-family borrower receiving a deferral is subject to restrictions, including the fact that during the period of the deferral, he or she may not: (A) evict or arrange for a tenant to vacate a unit in the property solely for failure to pay rent Additional fees; (B) impose fees, penalties, or other charges on a renter for late payment of rent; (C) require a tenant to vacate a unit in the property prior to the date that is 30 days after the date on which notice of eviction is given to the tenant; and (D) may only issue notice after the deferral has expired.
  • Key terms:
    • The CARES Act defines a “federal multi-family mortgage loan” as any loan (other than temporary financing such as a home loan) secured by a first or subordinate lien on multi-family residential property primarily intended for occupancy by five or more families are more families established, insured, guaranteed, or supported in any way by a civil servant or agency of the federal government.
    • CARES defines “Applicable Ownership” as multi-family home ownership that is covered by a state multi-family mortgage loan.
    • The CARES Act defines the “Covered Period” as the period commencing on March 27, 2020 and the first occurrence of (A) the end date of the national emergency declared by the President on March 13, 2020 in relation to the coronavirus outbreak -Sickness ends, and (B) December 31, 2020.
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