Barely a month ago loans were cheap, real estate transactions were booming - we all were shaking those hands and making those deals (some without hand sanitizer even).
I imagine you, like me, might be sitting at a “home office” - perhaps even with some “home staff”. I for one have been demoted from manager to janitor at this office - I’m sure you’ve had to make some adjustments too.
On to adjustments, I would like to share what we’ve been seeing in the multifamily space as a result of the COVID-19 pandemic. This article will specifically address the agency mortgage relief/forbearance program.
The below outlines programs for properties with mortgages that are federally insured, guaranteed, supplemented or assisted mortgages, including mortgages purchased or securitized by the GSEs. The below programs are still actively being determined and are subject to change. The information below is not guaranteed to be up to date or accurate For all immediate inquiries and for other loan types, call us and your current loan asset manager.
The agencies are pushing forward relief efforts to help what may be over 50,000 properties in need of some level of relief. The primary form of relief is in mortgage forbearance.
Mortgage Forbearance /fawr-bair-uhns/ : An agreement in which the lender agrees not to foreclose on a mortgage and the borrower agrees to a mortgage plan that will bring the mortgage current over a certain time period.
In this case, If the property owner agrees not to evict any tenants due to financial hardship caused by the pandemic, COVID-19, the agencies will allow the borrowers to defer their full P&I loan payments for up to 90 days.
You qualify if:
Your property collected $200,000 after expenses for each month of December, January and February. Your monthly loan payment is $160,000. Your debt service coverage is
In March, your collections dropped and your property income after expenses is now $150,000. Your debt service coverage is now .94.
Prior to 3/31
How to Apply:
Note that you can only apply for forbearance after you can demonstrate a debt service coverage of under 1.0.
Ensure that you can illustrate a debt service coverage (income after expenses divided by loan payment amount) of over 1.0 before March and under 1.0 after March.
“As a result of the ongoing health crisis created by the COVID-19 virus, we are experiencing lower rental collections at our property located at (insert street address). Prior to this crisis, the operations were current on all debt, tax and insurance payments. In order to remain fully operational, we would like to request financial relief and mortgage forbearance.”
Terms of the Forbearance:
Fees, Evictions & Distributions
No tenants may be evicted from the property due to financial hardship for at least 3 months and until the property has paid back the full amount of deferred loan payments.
No cash distributions to any equity holders until the property has paid back the full amount of deferred loan payments.
Currently, the last date to apply for mortgage forbearance is August 31st.
Extra Relief Programs
There is talk of allowing properties to pull from their repair and maintenance reserves to fund short term cash shortfalls resulting from the COVID-19 virus. While the mortgage forbearance program is the primary way to seek relief, in the event additional relief is required, your loan servicer may be able to approve the use of cash reserved for repairs and maintenance to cover short term operational deficit.
This has certainly been a shock. While the U.S. president and his administration are trying to get us out of quarantine and back in the office, we have to be prepared for this to last another 60-120 days. The good news is, America holds housing sacred - it’s part of the dream - and the government has made demonstrations that it is ready to support our industry. We at TapCap are in touch with owners, investors, banks, lenders and servicers - if any of this can be helpful to you, please reach out.
Stay safe, stay healthy, and please know, we are here and ready to help.