Freddie Mac Multifamily Revises COVID-19 Forbearance Program to Align with CARES Act
Freddie Mac, McLean, Va., revised its Multifamily COVID-19 forbearance program to further align with CARES Act provisions related to multifamily borrowers and tenants.
The program provides three months of forbearance for borrowers affected by COVID-19 along with a no-evictions policy for tenants during the forbearance period. The GSE created its forbearance program prior to the CARES Act, but the program required only minimal changes to be consistent with the new law.
“Our forbearance program is helping borrowers and tenants who are facing hardship as a result of COVID-19,” said Freddie Mac Executive Vice President and Head of Multifamily Deborah Jenkins. “The program has already proved to be an important source of relief for multifamily operators and residents who are struggling financially as a result of this national crisis.”
Freddie Mac changed its forbearance program in three ways:
–Updated Evictions Prohibition During Forbearance Period: If a borrower enters forbearance, Freddie Mac now restricts a borrower from evicting, giving notice of or starting an eviction of a tenant for nonpayment during the forbearance period. Freddie Mac’s initial program required no evictions of tenants for non-payment related to COVID-19 during the forbearance period. The change means there is no longer a requirement that tenants demonstrate their nonpayment is due to COVID-19 related hardship.
–Explicit Prohibition on Charging Tenants Late Fees, Penalties or Other Charges for Nonpayment: Borrowers that enter forbearance under the program cannot charge late fees, penalties or other charges related to tenant nonpayment of rent during the forbearance period, as required by the CARES Act. Freddie Mac added explicit guidance that multifamily borrowers may not charge such fees to tenants while in forbearance, in addition to Freddie Mac’s general requirement that borrowers follow all applicable laws.
–Extension of Program to End of Emergency Period: The last day to enter forbearance under the program is now the end of the federally declared emergency period or December 31, 2020, whichever comes first. Freddie Mac had previously set the program to expire August 1, 2020.
Under Freddie Mac’s COVID-19 Forbearance Relief program, 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 and by gaining lender approval. In turn, Freddie Mac is requiring no evictions for nonpayment during the forbearance period. The program is accessible to borrowers across the more than 27,000 properties that currently have performing Freddie Mac loans. Approximately 4.2 million U.S. renters reside at those properties.
The forbearance program is modeled on Freddie Mac’s disaster-relief forbearance plan introduced in the wake of Hurricane Harvey in 2017. Since then, Freddie Mac has implemented the forbearance plan in response to other natural disasters, including additional hurricanes and the California wildfires.