Foreclosure and Eviction Moritoriums
Updated: Mar 6
The Biden administration will extend the foreclosure moratorium and relief programs through June 30 amid the coronavirus pandemic. White House press secretary Jen Psaki said the extension will build on the executive order President Biden signed on his first day in office on Jan. 20, which extended the eviction moratorium through March 31. The Department of Housing and Urban Development, the Department of Veterans Affairs and the Department of Agriculture this week will expand foreclosure relief programs” through June 30. Also the administration will also add up to six months of additional forbearance for those who applied on or before June 20, 2020.
What do the eviction moratoria allow?
This moratorium prevents landlords from evicting tenants for nonpayment, although tenants can still be evicted for non-monetary reasons. To avoid eviction, tenants must provide a written declaration to their landlord, attesting that they have sought government rental assistance, will earn no more than $99,000 in annual income (or $198,000 if filing a joint tax return), cannot pay their full rent due to loss of income, work hours or extraordinary medical expenses, have used best efforts to make timely partial payments, and would become homeless if evicted. All rental properties are covered, but the CDC moratorium doesn’t apply in any state or local areas that have their own moratorium with the same or greater protection. In those areas, state or local law prevails.
Any unpaid rent after the moratorium expires, will require an eviction to regain possession. Some eviction laws allow tenants to avoid eviction by paying off the rent debt and some judges in eviction proceedings decide if tenants are liable for back rent. They could rule that tenants don’t have to repay before eviction.
No self help remedies available.
The only recourse to regain possession of a unit is through the courts and the eviction process. Self help actions such as changing the locks might be subject landlords to civil or criminal penalties, depending on the jurisdiction.
What tenants stop paying?
While the various moratoria block evictions, they do not relieve tenants of their obligation to pay rent or from any other terms of their leases. In fact, the declaration tenants must sign under CDC guidelines specifically states that rent is still due and that failure to pay back rent once the moratorium lifts renders the tenant subject to eviction. In addition, evictions for reasons, like engaging in criminal activity or damaging your property, are still allowed. Documenting these violations of the lease is crucial, however.
Can I stop paying my mortgage on my rental portfolio property?
While it may be tempting to skip a mortgage payment, you risk default and foreclosure by doing so. Defaulting borrowers should contact your lender early in the process if a tenant fails to pay rent, explain the situation and request forbearance, a temporary pause in payments, or a loan modification, which may result in a lower interest rate or extended term. There are various programs in place to help property owners avoid foreclosure, particularly for properties with federally backed mortgages. Check with the lender. Federally backed mortgages and pandemic-caused hardships, loans in forbearance will still be reported to credit bureaus as being current. If you have tenants who lose their income, or if you think they might, talk to them. Help them locate one of the many local, state and federal housing assistance programs available to cover housing cost. If President Biden’s American Rescue Plan is enacted, an additional $25 billion in rental assistance will be made available in addition to the $25 billion previously allocated by Congress. Let your tenants know you’re open to a payment plan.
Must the non-payment of rent relate to Covid?
The CDC order covers tenants who can’t pay their full rent due to a substantial loss of household income, loss of compensable hours of work, a layoff or extraordinary medical expenses. While the intent of the CDC moratorium was to prevent the spread of Covid, there is no requirement in the order that the income loss be due to Covid. State laws may differ.
Is it possible to refinance the mortgage on my rental properties to lower my expenses if my tenants aren’t paying rent?
While it is more difficult to refinance an investment property if the tenant hasn’t paid, it isn’t impossible. Qualifying for the refinancing is still possible based on the owner’s overall financial picture.
Robert K. Feldman
Attorney at Law