COVID-19-Related Multifamily Property Loan Forbearance Extended Indefinitely

There’s good news for landlords who are still feeling the effects of the pandemic in their pocketbooks and ledgers: The Federal Housing Finance Agency (FHFA), which manages Fannie Mae and Freddie Mac, has announced a new extension of forbearance programs for multifamily properties, which was set to expire on Sept. 30, 2021. This is the fourth extension of this program, but with one major difference: It has been issued without an end date, unlike prior iterations.

Qualifying multifamily property owners will be able to enter into new or modified forbearance programs for loans purchased by Fannie Mae or Freddie Mac, if they are still facing financial hardships. The lack of an end date on this newest extension, however, indicates that need for it is anticipated to continue for an uncertain period.

Forbearance is meant to protect everyone

Because the COVID-19 pandemic has been an unprecedented economic tsunami and continues to unpredictably interfere with every aspect of modern life, the FHFA forbearance program has been designed to protect as many people as possible from further financial struggles. Forbearance by its very nature stops payments on a loan (with the agreement that they will resume at a future date), which is a very good thing when there’s still so much uncertainty.

In order for investors to take advantage of this program, however, they have to agree to a few very specific items. First, they must inform tenants about protections available to them during the forbearance and repayment periods. Secondly, they have to agree not to evict tenants solely for nonpayment during the forbearance period.

In addition, the investor can’t charge late fees or penalties for nonpayment of rent on any property that’s in forbearance; they must provide the tenant with flexible repayment options for back rent; and any tenants who are asked to vacate must be given at least 30 days’ notice.

Evictions for properties in forbearance

Although there has been a lot of social media chatter that having a property in forbearance means a landlord or investor is no longer free to evict a tenant, that’s the farthest thing from the truth. You absolutely can still evict a tenant who is destructive, disruptive, or otherwise breaks the rules they agreed to abide by when they signed their lease.

The only restriction on evictions is if the tenant in question is being evicted solely for nonpayment of rent. If they’re an otherwise good tenant, it’s in your best interest, as well as theirs, to keep them around anyway. The forbearance is designed to help you retain these kinds of tenants through the COVID-19 pandemic’s economic ups and downs. It’s not at all meant to shield those tenants who are causing significant issues for you.

The Millionacres bottom line

Investors in properties that have tenants suffering financially from the pandemic have options if they choose to exercise them. Rather than dumping a perfectly good tenant because they’ve been facing continual layoffs, a lack of hours, loss of income, or are otherwise struggling to pay the rent, these FHFA forbearance programs allow you to put the rent on those tenants’ tabs, so to speak, and renegotiate repayment terms later.

The fourth extension of this program, with a notable lack of end date, is telling about the level of uncertainty the federal government sees within the ongoing pandemic. At some point, the pandemic should come to an end, but with the delta variant running loose, causing a whole new round of trash fires and smashing up the economy, no one seems confident enough to try to predict when it’ll all be over.

If you haven’t already applied for or received a forbearance, it would be a smart move to at least inquire about what your options are now. Because Fannie and Freddie buy different types of investment properties, there’s not going to be a single solution for all borrowers. Even if your tenants are still paying religiously, it’s important to have a strategy in place, just in case they hit a personal snag and have to stop.