FEDS FUND LOVE for multifamily…sort of

The news has been full of information about the $2-trillion federal stimulus package and how it will affect renters and homeowners. Now, Fannie Mae and Freddie Mac have announced they will create three-month grace periods for some multifamily property owners on the condition they suspend evictions for nonpayment of rent[1].

Landlords whose multifamily properties are financed through the GSEs may be able to defer three months’ worth of loan payments if they show hardship as a consequence of the virus and gain lender approval. Once that approval is granted, the landlord will not be permitted to evict tenants for non-payment of rent until the grace period is up.

“Renters should not have to worry about being evicted from their home, and property owners should not have to worry about losing their building due to coronavirus,” said FHFA director Mark Calabria.

At present, the FHFA has directed Fannie and Freddie to suspend residential evictions and foreclosures for 60 days. The agency stated more rules “could be coming” as the situation evolves[2].

“FHFA and the GSEs are monitoring the coronavirus national emergency’s effect on the housing market and will continue to update our policies when necessary,” the FHFA said.

Many landlords and homeowners seeking forbearance on their mortgage payments have complained that some forbearance programs require the missing payments be made in full at the end of the forbearance period. They say that their lenders are offering forbearance but will not allow an extension of the loan period or an adjustment of the payment amount[3].

“I was flatly told that they would waive late payment penalties for 60 days, but the entire payment would be due at the end of 60 days,” said one New Jersey homeowner. He said that since he thinks he can afford the payments in the short term by using his savings, he decided not to take the forbearance.

“I was thinking it would be good to preserve my savings until things are more back to normal to help out those family members who are worse off than I am,” he said, adding, “My money will run out if this continues.”

Fannie Mae and Freddie Mac loans on single-family owner-occupied residences may extend forbearance to 12 months and, for now, multifamily properties qualify for three. However, no property owner may assume they have forbearance. Instead, you must reach out to your lender and, in some cases, provide verification of your adverse circumstances.

Just remember, said Lending Tree chief economist Tendayi Kapfidze, “your mortgage will continue to accrue interest while in forbearance. This ultimately increases the total interest you pay over the life of the loan as interest is charged in higher amounts while in forbearance. It’s not a cost-less option, so don’t do it if you don’t need to.”

Do you think the current forbearance policies are going to meet future need?

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[1] https://www.barrons.com/articles/fannie-mae-and-freddie-mac-released-coronavirus-relief-plans-heres-what-it-means-for-landlords-and-renters-51585081954

[2] https://www.fool.com/millionacres/real-estate-financing/articles/fhfa-announces-new-mortgage-forbearance-guidelines/

[3] https://www.nj.com/coronavirus/2020/03/what-happens-if-i-cant-pay-my-mortgage-because-of-coronavirus.html

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