A Recap of Federal Loan Program Developments Affecting Commercial Real Estate

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This week saw a plethora of activity to support federally related loan programs affecting commercial real estate. Below is a summary of the applicable guidance, announcements and proposed laws.

PROPOSED CARES ACT PROVISIONS RELATED TO GSEs & CRE (3/26/2020)

• Consumer Right to Request Forbearance: Applies to federally backed mortgage loans (Fannie/Freddie/FHA/VA/USDA) for those directly or indirectly impacted by the COVID-19 virus (if the borrower requests and affirms hardship). No signature or documentation is required, and the initial period is up to 180 days, with the option to extend for up to an additional 180 days. This broadly mimics the programs Fannie Mae and Freddie Mac have already announced (discussed below).
• Multifamily Mortgage Forbearance: A total of 90 days of forbearance (30-day forbearance on initial request, extendable for two additional 30-day periods), which applies to federally insured, guaranteed, supplemented, or assisted mortgages, including mortgages purchased or securitized by Fannie Mae or Freddie Mac (the Enterprises).
• Moratorium on Evictions: For 120 days after date of enactment, applies to single-family and multifamily properties that participate in federal housing, homelessness, rural programs, or properties financed by federally insured, guaranteed, supplemented, or assisted mortgages, including mortgages purchased or securitized by the Enterprises.

FHFA ANNOUNCEMENTS

• Eviction Suspension Relief for Renters in Multifamily Properties (3/23/2020): To keep renters in multifamily properties in their home and to support multifamily property owners during the coronavirus national emergency, the Federal Housing Finance Agency (FHFA) announced that the Enterprises will offer multifamily property owners mortgage forbearance with the condition that they suspend all evictions for renters unable to pay rent due to the impact of coronavirus for the entire duration of time that a property owner remains in forbearance. The forbearance is available to all multifamily properties with an Enterprise-backed performing multifamily mortgage negatively affected by the coronavirus national emergency (as determined by the servicer).
• Additional Liquidity in the Secondary Mortgage Market (3/23/2020): To help support immediate needs for liquidity in the secondary mortgage market, FHFA has authorized the Enterprises to enter into additional dollar roll transactions (which provide mortgage-backed securities investors with short-term financing of their positions, providing liquidity to these investors). Eligible collateral is limited to Enterprise mortgage-backed securities and the transactions must be undertaken via an auction or similar mechanism to ensure that they occur at a fair market price.

FANNIE MAE ANNOUNCEMENTS

• Assistance to Help Renters Impacted by COVID-19 Stay in Their Apartments (3/24/2020): In coordination with the FHFA, Fannie Mae is allowing lenders to grant forbearance to borrowers in properties financed by Fannie Mae for up to three months if the borrower is experiencing hardship due to the impacts of COVID-19 (as determined by the servicer). As part of the forbearance plan, borrowers must agree to suspend evictions of tenants who are facing financial hardship due to the current crisis. Fannie Mae anticipates that this will provide relief to renters across more than 27,000 properties.

FREDDIE MAC ANNOUNCEMENTS

• Nationwide COVID-19 Relief Plan Affecting More than 4 Million Multifamily Apartment Renters (3/24/2020): Multifamily landlords whose properties are financed with a Freddie Mac Multifamily fully performing loan can defer their loan payments for 90 days by showing hardship as a consequence of COVID-19 (as determined by the servicer). In turn, Freddie Mac is requiring landlords not to evict any tenant based solely on non-payment of rent during the forbearance period. Through partnership with its network of Optigo lenders and investors, Freddie Mac anticipates that the program can provide relief for up to 4.2 million U.S. renters across more than 27,000 properties.

These materials have been prepared by Seyfarth Shaw LLP for informational purposes only and do not constitute legal advice.