As the end of June is quickly approaching, multi-family owners will see their foreclosure moratorium relief extended.

Fannie Mae and Freddie Mac will continue to offer forbearance to multi-family property owners through September 30, 2021, along with tenant protections, the Federal Housing Finance Agency (FHFA) recently announced.

For multi-family owners, this is the third extension of the program. For all other property owners and types, forbearance deadlines have not been announced. Property owners with a forbearance plan in place on or before February 28, 2021 might be eligible for an additional forbearance extension of up to three months after an initial 180-day forbearance and 180-day extension ends. To find out whether they qualify, property owners may contact their servicer.

Property owners backed with Fannie Mae or Freddie Mac multi-family mortgages may enter a new or modified forbearance plan when they experience a financial hardship due to COVID-19.

Property owners entering a new or modified forbearance agreement need to:

  • inform tenants in writing about tenant protections available to them during the property owner’s forbearance; and
  • agree not to evict tenants solely for nonpayment of rent while the property is in forbearance.

Additional tenant protections during the repayment periods include:

  • giving tenants at least 30-day notice to vacate;
  • waiving any tenant late fees or penalties for nonpayment of rent; and
  • allowing flexibility in the repayment of back-rent owed from tenants, not necessarily in a lump sum.

3.1% of multi-family and commercial mortgages are 90+ days delinquent as of May 2021, according to the Mortgage Bankers Association (MBA).

The FHFA recognizes that new COVID-19 cases are declining, but many renters are still recovering financially and will likely need additional time to resume payments. The extra three months of forbearance are part of the effort to allow these property owners and their tenants the ability to get current with their mortgages and missed payments.

More extensions to come?

The extension of forbearance plans for multi-family mortgages backed by Fannie Mae and Freddie Mac might be an indication that other extensions will occur before the quickly approaching June 30 deadline.

Currently, the federal and state foreclosure and eviction moratoriums are set to expire June 30, 2021. These moratoriums have prevented homeowners and renters from losing their housing. Further, some California metros have already voted to extend eviction moratoriums and tenant protections past the June 30 deadline, so there is already some variance for when tenants will be up for eviction.

For homeowners, two million U.S. homeowners are currently in forbearance programs. Of these homeowners in forbearance, 1.8 million are delinquent on their payments.

For renters, comprehensive data is more allusive. Across the nation, missed rents have been estimated to be between $8.4 billion and $52.6 billion. When broken down to the household level, the average rental household is behind roughly four months on their rent.

Without jobs, homeowners and renters will be unable to resume payments or make up missed payments. The catch-up on housing payments will set would-be homebuyers back for years. At the end of Q1 2021, California is 1.7 million jobs below the pre-recession December 2019 peak.

It is not yet known whether there will be additional extensions of the foreclosure and eviction moratoriums. However, the FHFA’s announcement is a good indication that the government is attempting to work with property owners to keep tenants housed during this transition period.

When the moratoriums are finally lifted, foreclosures and vacancies will impact the housing market. Rental vacancies will happen first since eviction from rentals is a quicker process than foreclosure. Then, foreclosures will hit the market and gradually build up, increasing vacancies and reducing prices.

The timing of this process will be determined on whether any additional extensions of the eviction and foreclosure moratorium are announced. Stay tuned to firsttuesday for more information as this story develops.

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