Reed Smith Client Alerts

During the continued COVID crisis, federal agencies continue to extend the foreclosure and eviction moratoriums on residential properties subject to federally backed mortgage loans. Originally enacted by legislative relief in the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, the Federal Housing Finance Agency announced that it is extending foreclosure and eviction suspensions until at least December 31, 2020. The U.S. Department of Housing and Urban Development followed suit shortly thereafter and issued Mortgagee Letter 2020-27, announcing that the Federal Housing Administration was similarly extending foreclosure and eviction moratoriums through the end of the calendar year.

Additionally, on September 4, 2020, the Center for Disease Control and Prevention (“CDC”) published an unprecedented Agency Order temporarily prohibiting evictions of qualified tenants from residential properties on the basis of nonpayment of rent through December 31, 2020. Unlike its federal counterparts, the CDC’s moratorium applies to all residential properties, regardless of whether the properties are subject to a federally-backed mortgage loan. To qualify for the CDC’s protections, tenants are required to show that they earned less than $99,000 during the 2020 calendar year ($198,000 for couples filing jointly), were not required to report any income in 2019 to the Internal Reporting Service, or received a stimulus check pursuant to Section 2201 of the CARES Act. Tenants must also certify that: (1) they are unable to pay rent as a result of COVID-19; (2) they will likely become homeless if evicted; and (3) they made previous efforts to obtain other government assistance to prevent eviction. Under the Agency Order, tenants are still required to satisfy all outstanding rent payments upon the moratorium’s expiration.

Although it is questionable whether the CDC has the constitutional authority to unilaterally order a moratorium on eviction proceedings, it is clear that federal agencies are seeking to extend foreclosure and eviction protections during the ongoing COVID-19 pandemic. As concerns the moratoriums issued on the state level, several of those states, including Alabama, Florida, Iowa, Mississippi, Pennsylvania, Tennessee, and Wisconsin, have allowed their state specific moratoriums to expire. Download the comprehensive spreadsheet capturing the current orders and policies on foreclosures and evictions.

In addition to the protections under the CARES Act and the CDC Agency Order, the following states have issued executive orders and/or legislation that restrict foreclosure and eviction proceedings in response to the ongoing COVID-19 pandemic, including potential remedies for violations of the new laws:

California: On August 13, 2020, the Judicial Council of California voted 19-1 to end its emergency moratorium on evictions and foreclosure actions. However, on August 31, 2020, the Governor signed Assembly Bill No. 3088, which passed the Tenant, Homeowner, and Small Landlord Relief and Stabilization Act (the “Tenant Act”) into law. Among other protections, the Tenant Act prohibits evictions on the basis of missed rent payments resulting from COVID-19 that occurred between March 1, 2020 and August 31, 2020. Beginning on September 1, 2020, and running through January 31, 2020, tenants are obligated to pay at least 25 percent of the total rent owed in order to continue benefiting from the protections of the new law. The Tenant Act does not waive unpaid rent; but rather, converts the outstanding amount owed to consumer debt, which may become collectible in Small Claims Court beginning on March 1, 2021. If a COVID-19 impacted tenant is unable to satisfy the 25 percent minimum, the Tenant Act permits evictions to proceed beginning on February 1, 2021.

The Bill also enacted the COVID-19 Small Landlord and Homeowner Relief Act of 2020 (the “Homeowner Act”) requiring mortgage servicers to provide written notice to a borrower if the mortgage servicer denies a forbearance request. Under the Homeowner Act, if a mortgage servicer denies a forbearance, it must provide the reasons for the denial so long as the borrower was (1) current on payments as of February 1, 2020 and (2) experiencing a financial hardship that prevents the borrower from making timely payments on the mortgage obligation due, directly or indirectly, to the COVID-19 emergency. The Homeowner Act further requires mortgage servicers to comply with applicable federal guidance regarding borrower options following a COVID-19 related forbearance. Under the Homeowner Act, a borrower, who has been harmed by a lender’s material violation, may bring an action to obtain injunctive relief, damages, restitution, and any other remedy to redress the violation. The Homeowner Act further provides that a prevailing borrower may be awarded reasonable attorneys’ fees and costs with respect to such an action.