Landlords! These are your Forbearance Options

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​ As the nation struggles to combat the COVID-19 coronavirus, the United States mortgage industry is doing its part to help. The most powerful tool they’re using? Forbearance programs that allow temporary deferral or reduction of mortgage payments.

People shouldn’t be at risk of losing their homes or apartments at a time when we’re all so greatly in need of safe, secure shelter. That’s why, on March 19, 2020, the Department of Housing and Urban Development (HUD) and Federal Housing Finance Agency (FHFA, which regulates government-backed loan providers Fannie Mae and Freddie Mac) announced an immediate 60-day moratorium on foreclosures and evictions of coronavirus-impacted homeowners and renters living in properties backed by FHA-insured mortgages.

State and local governments are also putting their own eviction moratoriums in place. The Motley Fool’s millionacres website is tracking these moratorium updates as they’re announced.

What does this mean for the landlords who must suspend evictions? Landlords with FHA-backed mortgages may be able to benefit from a special COVID-19-focused forbearance program.

Forbearance in Exchange for Suspending Evictions

The FHFA announced on March 23, 2020, that it is extending its forbearance efforts to cover all multifamily property landlords whose mortgages are backed by Fannie Mae or Freddie Mac. In return for suspending evictions of coronavirus-impacted renters, landlords may be granted mortgage forbearance.

FHFA Director Mark Calabria’s statement explains the rationale: “Renters should not have to worry about being evicted from their home, and property owners should not have to worry about losing their building, due to the coronavirus. The multifamily forbearance and eviction suspension offered by the enterprises should bring peace of mind to millions of families.”

How the FHFA Forbearance Program Works for Landlords

The forbearance process for multifamily landlords, as well as its short-term benefits and longer-term implications, are similar to those for homeowners. To make sure you understand forbearance pros, cons, and considerations, check out our homeowner-focused blog on mortgage forbearance.

That said, the FHFA forbearance program for landlords comes with some additional requirements and limitations. As reported by Barron’s, in addition to gaining lender approval for mortgage forbearance, landlords of multifamily properties with FHA-backed mortgages:

  • May be eligible to defer mortgage loan payments for up to three months
  • Must provide documentation showing that their current financial hardship is a result of the coronavirus
  • Must not, during the forbearance period, evict tenants “based solely on non-payment of rent”

In the longer term, tenants will still be responsible for paying rent owed to landlords. The program simply provides both landlords and tenants with a period of increased flexibility. Landlords should proactively work with impacted tenants to agree on reasonable payment plans allowing them to defer or reduce rent payments.

What If You’re a Landlord Whose Property Doesn’t Qualify?

At this time, landlords of commercial tenant properties or multifamily properties backed by conventional loans may qualify for state and local assistance or forbearance programs. As state and local governments determine how best to help their communities, new programs and guidance are being announced often. Where to begin?

  • Start by checking out millionacres, a great resource summarizing and linking to many city- and state-specific announcements and media coverage on evictions.
  • Contact your local housing authority. They will be able to provide any eviction moratorium or COVID-19 guidance and resources specific to landlords in your area.
  • Work directly with impacted tenants to agree on reasonable payment plans. By making a plan and getting agreements in writing, you’ll be better-positioned to plan for the future.

Get this far without understanding what forbearance really is? Read here!

Or would you like to understand your forbearance options as a homeowner? Read here!

Covered wants to help!

From our family to yours, let’s get through this together.

  1. Covered is teaming with mortgage servicers to help homeowners proactively lower their homeowners insurance costs. This goal is to help minimize the potential budget jolt of increased monthly mortgage payments (caused by the need to “catch up” on escrow payments toward taxes and insurance). But there’s no need to wait to get started! Let our Digital Insurance Marketplace do the homework, or have one of our expert insurance advisors do a free policy review. Bundling, increasing deductibles, or adjusting your coverages or limits may help you find the best value for your budget.
  2. With interest rates at an all-time low, refinancing your mortgage may help you reduce your monthly mortgage payments for the longer term. Learn how refinancing works.
  3. Understanding your mortgage agreement can feel daunting. Check out Covered’s Mortgage 101 series for A Guide to Understanding Basic Mortgage Terms and How Does a Mortgage Work?

Let us help you!

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Want to get a leg up on the homebuying process and start figuring out your homeowners insurance? We welcome you to explore our blog and ask our insurance experts any questions you may have.

Cover Photo by Alexander Dummer on Unsplash

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