CARES Act: On March 27, 2020, Congress unanimously passed the CARES Act, which among other things, advanced legislation intended to bring financial relief to homeowners and tenants impacted by COVID-19. For 60 days beginning on March 18, 2020, except with respect to vacant and abandoned properties, the CARES Act provides a moratorium on the initiation, continuation, and enforcement of foreclosure actions involving a federally backed mortgage loan.
Under the Act, borrowers experiencing a financial hardship due to COVID-19 may request a forbearance on federally backed mortgages. Upon request, homeowners of properties designed for one to four families shall be granted a forbearance up to 180 days, which shall be extended for an additional 180 days at the request of the borrower. During this time, no fees, penalties, or interest beyond the amount scheduled or calculated, as if the borrower made all contractual payments on time and in full under the terms of the mortgage contract, shall accrue on the borrower’s account.
Similarly, borrowers of multi-family properties comprised of five or more dwelling units may also be eligible to receive a forbearance on federally backed mortgages. Upon submitting a request indicating a financial hardship as a result of COVID-19, the servicer shall provide a borrower with a forbearance up to 30 days, and may extend the forbearance for two additional periods of 30 days upon the borrower’s request made 15 days before the end of the current forbearance period. During the forbearance period, however, a borrower of a multi-family property is enjoined from initiating or enforcing any eviction against a tenant solely for nonpayment of rent. The borrower is further prohibited from imposing any late fees, penalties, or other charges for late payment of rent during the forbearance period. In fact, under the CARES Act, effective March 27, 2020, the filing of any eviction action for non-payment of rent is stayed for 120 days. During this 120-day moratorium, landlords are prohibited from imposing fees, penalties, or other charges to tenants with respect to nonpayment of rent.
The CARES Act further amends the Fair Credit Reporting Act to require a furnisher to designate a credit obligation as current when the furnisher accommodates a borrower affected by COVID-19, either by deferring or forbearing payment, modifying a loan, or otherwise granting relief and the consumer acts in accordance with the accommodation. Under the Act, while accommodated delinquent accounts continue to be designated as delinquent, they must be reported as current if the consumer brings the account current during the accommodation. This credit reporting provision remains in effect for 120 days from enactment or 120 days after the national emergency officially ends, whichever occurs later.
Prompted by the new legislation, the CFPB has just issued a Statement on Supervisory and Enforcement Practices Regarding the Fair Credit Reporting Act and Regulation V in light of the CARES Act in which it recognizes the challenges faced both by consumers and short-staffed credit bureaus and furnishers. In this non-binding general statement of policy the CFPB supports the voluntary efforts of furnishers to provide payment relief and announces its intention not to take enforcement action against furnishers who accurately report their payment relief measures. In addition for enforcement purposes, the statement relaxes the statutory timeframes normally imposed on furnishers and credit bureaus when investigating consumer reporting disputes.