eviction and foreclosure moratorium

Eviction and foreclosure moratoriums have been used over the last few months to help renters, homeowners, and landlords navigate the COVID-19 pandemic. Though the most recent moratoriums expired at the end of July, government organizations have put updated eviction and foreclosure moratoriums in place.

What are the terms of these updated moratoriums? How are they going to affect your business? What types of protections can you expect to see in action?

These are unprecedented times to be a landlord, and we’re here to help you make sense of these confusing updates. Let’s break it down together.

A Table Of Contents For The Eviction Moratorium

The Updated Eviction And Foreclosure Moratorium

Through actions by the CDC, the FHFA, and HUD, an updated eviction and foreclosure moratorium is going into effect through December 31, 2020. What are the specifics of this update?

The Eviction Moratorium

The Updated Eviction And Foreclosure MoratoriumThe CDC and HHS are issuing an order that will halt evictions through the end of 2020 in specific cases. This order does not apply in areas where state or local eviction moratoriums are just as strict as the details of the CDC’s order.

The order will be officially published on September 4th and will then be in effect through the end of 2020.

Here are some important details to know about this order before we get into the specifics of how it works.

  • It halts the eviction of any covered individual until the end of December 2020.
  • There are limitations on who is a covered individual.
  • It does not remove the obligation to pay rent back at a later date.
  • It does not remove the ability to charge late fees or penalties.
  • It does not allow tenants to break their lease outside of the nonpayment of rent.

To qualify under this eviction moratorium, the tenant must:

  • Apply for all applicable government assistance programs for rent or housing
  • Fit one of the following categories:
    • Make less than $99,000 per year
    • Do not have to report income to the IRS
    • Receive an Economic Stimulus Check under the CARES Act
  • Be unable to pay the complete rent due to substantial loss of work or medical expenses
  • Be making their best attempt to pay as much rent as possible
  • Have nowhere else to go; would be homeless or in a shared-living setting if evicted

If your tenant believes they are a covered individual, they must fill out the CDC’s declaration form and give it to you, the landlord. This form provides the necessary information to prove that the tenant is a covered individual. Each adult on the lease contract must fill one out.

Once the sworn declaration has been given to you, the CDC’s order says that you are no longer permitted to evict the tenant for nonpayment of rent. Tenants can still be evicted for other reasons.

The Foreclosure Moratorium

The FHFA and HUD have worked together to extend the foreclosure moratorium to the end of December 2020 on all federally-backed mortgages.

According to the details of the moratorium:

  • Foreclosure actions cannot be pursued on all FHA-insured single-family properties
  • Homeowners with an FHA-insured mortgage can request continued mortgage forbearance with the option to extend for one additional year
  • Lump sums cannot be required on FHA-insured mortgages after the forbearance ends

While this moratorium does not apply to private mortgages, there are many lenders who are following similar guidance with their own programs.

How Landlords Will Be Affected

While the mortgage forbearance program may be beneficial for some landlords, there is no doubt that the eviction moratorium is going to make business difficult for many landlords. The CDC is acting in their best interest of preventing a public health crisis, but the moratorium does not provide much additional support for landlords.

If you have tenants who are covered under the eviction moratorium, there is a chance that they will not be paying rent.

By this point in the pandemic, you are probably well aware of what your tenants can and cannot handle. Landlords with tenants who are already behind on or not paying rent are likely to see that situation continue. If you are one of those landlords, it’s time to prepare.

How To Protect Your Business

With news of this updated moratorium, make sure you prepare yourself as much as possible.

Connect With Lenders

How To Protect Your BusinessAre you eligible for mortgage forbearance on an FHA-backed mortgage? Is the private lender funding your mortgage offering extended forbearance? Find out and make sure you are aware of what is going on with your mortgages if you have any active ones.

Most lenders are continuing to offer some type of relief, but you may need to call them directly to put that relief in action. Find out as soon as possible, and take advantage of the protections you can get through a forbearance during these difficult times.

Streamline Your Costs

Budgeting and paying close attention to your bottom line and rainy day fund during this time is very important. While not all of your tenants are going to fit the updated moratorium, there is a chance you will continue to miss out on expected income during this time.

Keep a close eye on your finances. Streamline costs where you can, and consider your situation very carefully before expanding your investments at this time.

Record-Keep The Rent

Your business plan already includes clear tracking of rental payments, but that tracking needs to be more accurate than ever during this time.

If you have covered tenants who are not able to pay the full amount or aren’t paying any rent at all, you will want to make sure you are keeping a clear and accurate record of every detail. Down the line, you may still need to file an eviction suit if the tenant does not pay back what they owe.

Keeping full and complete details is always important during an eviction case, but those details are likely to be even more important after the moratorium is lifted. This confusing time is unprecedented, so ensure your record-keeping is as detailed as possible.

Ensure Tenants Meet The Conditions

If tenants send the declaration form to you, take time to connect with the tenant and ensure they actually meet the requirements. It’s not clear at this time if landlords can request additional proof of each requirement, but it is reasonable for landlords to review the document with their tenants.

Ask the tenant to verbally clarify that they qualify for each step of coverage:

  • Have they applied for government assistance?
  • Are they eligible as per their financial situation?
  • Have they lost a substantial amount of work or seen a huge increase in medical bills?
  • Do they have nowhere else to go?

By verbally confirming the situation with your tenants, you can remind them that lying on this declaration will only cause them more problems down the line. This conversation can help to deter any tenants who may consider lying about their status to avoid paying rent.

Continue To Pursue Eviction For Other Reasons

If you have tenants that are breaking their lease for reasons other than nonpayment of rent, you are still permitted to pursue eviction at this time according to the CDC’s order. Tenants who are breaking the law or otherwise doing an eviction-worthy action on your property can be evicted.

What To Do When Tenants Can’t Pay

If your tenants are in a situation where they are not able to pay you the complete monthly rent, it’s going to be a trying situation for you both. Foreclosure moratoriums can help to decrease your monthly expenses, but they will not be eliminated completely. Eventually, your tenant will be responsible for paying you back.

Knowing the resources that are available to tenants at this time is a great way to keep things moving between both parties.

Read up on the following in your area, and pass along the information to your tenants as needed:

  • Cities that received government grants may be using them for rental assistance programs
  • Housing assistance programs may offer to fund renters struggling at this time
  • HUD resource portal that may provide assistance
  • Local non-profits may be running rental relief programs

The best way to find out about these programs is to research online and to reach out to your local county health and government boards. These organizations should have the details on what is available locally, and you can help connect your tenants with that information.

Moving Forward

While the foreclosure moratorium issued by the FHFA and HUD is similar to what we saw in the CARES Act, the CDC order is brand new and unlike anything we have seen before. Many landlords and rental experts are expecting to see this order challenged as time goes on.

However, the order should be considered to be law at this point in time.

Keep an eye on developing news around the order, but continue to make plans on how you will manage your business with the order in effect.

Work with your tenants as much as possible to keep rent moving between you. At this time, we must find ways to keep moving forward. As you go, continue to document everything to make sure you can get paid back what you are rightfully owed down the line.