March 26, 2020
In keeping with the March 23, 2020, announcement from the Federal Housing Finance Agency that multifamily property owners would be eligible for mortgage forbearance on the condition that they suspend evictions for renters unable to pay rent due to the impact of coronavirus, Freddie Mac has provided its lenders with additional details on implementation of the forbearance plans, and the required form documentation.
Freddie Mac’s program will apply to its portfolio loans and to loans included in Freddie Mac securitization trusts. It will offer a three-month forbearance on all payments of principal and interest, and all required deposits impounds and reserves, without any late charges or default interest; the deferred amounts are to be repaid in 12 equal, monthly instalments, beginning after the three-month forbearance period.
Freddie Mac will prohibit property owners who enter into a forbearance agreement from evicting any tenant during the three-month forbearance period, based solely on non-payment of rent as a consequence of the impact of the coronavirus; this includes illness, caring for a family member, job loss, reduced hours, temporary unpaid leave or any combination of those factors. Also, borrowers will be required to provide written updates to their loan servicer about any material change or impact to the related property and its financial condition, tenants and occupancy.
Additionally, Freddie Mac will be reimbursing up to $750 per loan in servicer’s counsel fees, for forbearance agreements on its approved form without modification.
As is typically the case, Freddie Mac’s forbearance would terminate if there were to be another, unrelated event of default on the loan, either during the three-month forbearance period or the 12-month repayment period. Documentation allowing lenders to process forbearances is now available.
Freddie Mac’s forbearance program has fewer restrictions than a comparable program announced on March 24 by Fannie Mae. The Fannie Mae program accelerates repayment of the forborne amounts to the extent of the borrower’s receipt of business income interruption insurance payments or payments under other assistance or relief programs. Fannie Mae prohibits tenant evictions until the mortgage loan is brought current, and requires that its borrowers extend rent forbearance to tenants, also over a 12-month period. Also, Fannie Mae is requiring either the borrower or servicer to pay the counsel fees for the forbearance.
McGuireWoods’ real estate group has an extensive practice representing “Optigo Lenders” in Freddie Mac’s “Optigo” program in the origination and servicing of multifamily mortgage loans; lenders under Fannie Mae’s “Delegated Underwriting and Servicing” program; and commercial and multifamily mortgage lenders generally, including banks, CMBS lenders and servicers, insurance companies, debt funds and other portfolio lenders. For questions or additional guidance on how commercial and multifamily mortgage lenders are responding to COVID-19, please contact one of the McGuireWoods real estate finance team members listed, or any of the McGuireWoods COVID-19 Response Team members .
McGuireWoods is ready to help and process forbearance requests, as well as help with all of your servicing and origination needs.