Relief for Borrowers From the Federal Government and in NY and Fla.
While the COVID-19 pandemic deepens its financial hardship nationwide, the federal and certain state governments have begun to announce mortgage and loan relief measures.
On Thursday of last week, the Department of Housing and Urban Development (HUD) and Federal Housing Finance Agency (FHFA) ordered a suspension of evictions and foreclosures for 60 days, with possible extensions if necessary. The moratorium only applies to homeowners with mortgages insured by the Federal Housing Administration (FHA) (covering around 8.1 million households) and only covers mortgages for single family homes. The order prevents the initiation of new foreclosure actions, and also suspends foreclosure actions currently in progress. While lenders that do not issue HUD or FHA loans are not required to comply with the federal directions, many are choosing to do so. Bank of America, for example, has temporarily paused all foreclosure sales, evictions and repossessions.
Additionally, FHFA and the Federal Home Loan banks are providing payment forbearance to borrowers for up to 12 months due to hardship. Borrowers must seek the forbearance relief from their loan servicers. While some lenders may simply tack on the additional months to the end of the term, others may require a lump-sum payment at the end of the forbearance period. Most other lenders are offering similar forbearance relief, but usually for a shorter period of three to four months.
In New York, Governor Andrew Cuomo announced late last week the issuance of a directive from the Department of Financial Services (DFS) that mortgage payments would be suspended for 90 days based on an assessment of financial hardship due to the coronavirus. He also announced that the directive would include no negative reporting to credit bureaus based on participation in the program, a grace period for loan modifications, the suspension of late payment fees, a temporary postponement of foreclosures and a suspension of evictions until further notice. On Saturday, Governor Cuomo issued executive order 202.9, which provides: “The Superintendent of the Department of Financial Services shall ensure under reasonable and prudent circumstances that any licensed or regulated entities provide to any consumer in the State of New York an opportunity for a forbearance of payments for a mortgage for any person or entity facing a financial hardship due to the COVID-19 pandemic. The Superintendent shall promulgate emergency regulations to require that the application for such forbearance be made widely available for consumers, and such application shall be granted in all reasonable and prudent circumstances solely for the period of such emergency.”
Other than the urged suspension of evictions, there has been no official action in New York from the Governor or any state agency on any type of rent relief package. This is expected to be addressed soon and merits close monitoring. Rent delinquency is surely to increase in the months ahead, which will put significant pressure on commercial and residential landlords, who may themselves require relief in the form of direct subsidies, mandated loan forbearances and tax abatements.
In Florida, Governor Ron DeSantis has not enacted a statewide foreclosure or eviction moratorium, though he is said to be considering such a move. Unlike Governor Cuomo, Governor DeSantis has not issued any executive order or directive for the forbearance of mortgage payments. It will be up to individual mortgage companies to decide whether to provide mortgage forbearance, although most seem to be doing so.
Without action from the Governor, some counties in Florida have stepped in and suspended eviction activities. In Miami-Dade County, for example, the police department announced that it would not assist with evictions during the declared state of emergency. Orange County has taken a different approach, offering a COVID-19 rental assistance program for its workers who have been laid off or had their hours reduced because of the pandemic.
It should be noted that, as has been widely reported, the state and federal courts have largely closed their doors to public access and issued stays of non-essential services. For example, the Florida Supreme Court instructed the chief judges of each circuit court to cancel or postpone all court proceedings other than essential proceedings and those critical to the state of emergency and public health emergency. Circuit courts have adhered to the instruction by limiting hearings to first appearances, mental health orders and juvenile proceedings, while e-filing services remain available. In New York, even electronic filings are not being accepted in non-essential proceedings. This does not extend to the City Register, which is still accepting e-filings and payments. Many legal deadlines have also been extended due to the court closures and postponement of proceedings. In New York, for example, statutes of limitations are suspended while the courts are effectively closed. In Florida, most legal deadlines have also been extended.
Importantly, however, the extension of court deadlines does not necessarily mean contract deadlines or contractual notice provisions have been extended. Parties should ensure that they comply with any contractual deadlines or negotiate any necessary extensions. To accommodate transactions, both New York and Florida have also relaxed certain in-person requirements for oath affirmations and notaries, permitting them to be conducted remotely using audio-video equipment.
Lastly, lenders, mortgagors, service providers and landlords should be aware of the small business loans that the federal and state governments are offering to alleviate the current economic strain. The U.S. Small Business Administration is using its Economic Injury Disaster Loans (EIDL) program to help small businesses suffering from the economic impacts of the coronavirus. The EIDL program is open to small businesses, small agricultural cooperatives and most private nonprofit organizations located in a “declared disaster area.” Most, if not all, qualify as “declared disaster areas” under the EIDL program. The interest rates for loans under the EIDL program will not exceed 4 percent per year, with repayment terms to not exceed 30 years, and the maximum loan amount is $2 million. Businesses can apply for loans under both programs and combine the proceeds to meet their financial needs.
Similarly, Governor DeSantis has made certain financial resources available to businesses suffering economic strain. The Florida Small Business Emergency Bridge Loan Program, which is managed by the State Department of Economic Opportunity, is available to small-business owners located in all Florida counties that have suffered economic damage as a result of COVID-19. The loans offered are short-term and interest free for up to 12 months. If the loan is not repaid within the year, an interest rate of 12% per annum is applied to the remaining balance. For-profit, privately held businesses with a minimum of two and a maximum of 100 employees, established prior to March 9, 2020, and that have suffered economic injury are eligible for the program. Applications will be accepted until May 8, 2020.
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