Covid-19: Mortgage Relief Programs for Real Estate Investors

Eman Hamed • Apr 24, 2020


As the coronavirus (COVID-19) pandemic sweeps across the US and the rest of the world, many real estate investors and landlords are feeling the financial effects of this crisis. With so many people losing their jobs, a lot of people can’t pay their rents, which makes this a really difficult time to be a renter. Consequently, this is also affecting owners of rental properties who depend on rental income to cover monthly mortgage payments, utilities, taxes, insurance, maintenance, etc. Fortunately, the CARES Act offers mortgage relief programs that’ll keep real estate investors and landlords affected by COVID-19 from falling into debt in 2020.

Keep in mind: mortgage relief for real estate investors is the suspension of payments on a rental property mortgage loan. Meaning, this relief is temporary and the debt doesn’t just go away. Instead, lenders don’t collect loan payments during what’s called a “forbearance period”. So, you still owe the skipped payments – just at a future date. Lenders won’t report you to a credit bureau, but they’ll typically continue charging interest on your unpaid debt.

Here’s a list of coronavirus mortgage relief options available that you can benefit from as a real estate investor in the US housing market 2020.

Economic Injury Disaster Loans (EIDL)
On March 27th, President Donald Trump signed the Coronavirus Aid, Relief, and Economic Security Act (or CARES Act). The $2 trillion coronavirus stimulus package aims to support the US economy by providing financial assistance to struggling industries and individuals during this pandemic. If you’re interested, you can read the entire document here. There are several new programs under the CARES Act that provide help for small businesses, sole proprietors, independent contractors, and those who are self-employed. However, one of the most beneficial mortgage relief programs for real estate investors is the Economic Injury Disaster Loan (EIDL).

The US Small Business Administration (SBA) is currently offering special disaster loans for small businesses with less than 500 employees who were affected by the COVID-19 pandemic. These loans help businesses pay their payroll, rent, monthly mortgage payments, utility, and other operating expenses. These loans are available to most real estate businesses including brokerages, agents, wholesalers, appraisers, property managers, inspectors, as well as individual landlords and real estate investors. For those who qualify, the current terms of this loan program are as follows:
  • You may borrow up to $2 million in disaster assistance
  • Loan terms up to 30 years
  • Interest rates of 3.75% for businesses and 2.75% for non-profits
  • The first 12 months of mortgage payments are automatically deferred
  • No penalties for early repayment
Federally-Backed Mortgage Payment Deferral
Another section of the CARES Act deals with mortgages and foreclosures, including eviction moratoriums and mortgage reliefs. The act directs lenders holding federally-backed mortgages to suspend borrowers’ payments for 3 – 12 months if they suffer from lost income due to the coronavirus outbreak. Under this provision, landlords and multifamily investors with a federally backed mortgage (by Fannie Mae, Freddie Mac, FHA or other federal administrations) can request mortgage forbearance for at least 90 days. Also, under the direction of the FHFA, Fannie Mae and Freddie Mac will suspend evictions and foreclosures on single-family mortgages for at least 60 days.

Exercising your right under this provision won’t impact your credit score and your lender will waive any late payment fees during this time. Investors are eligible for mortgage forbearance regardless of whether their property is owner-occupied, a second home or an investment property. What’s more, you also have several repayment options at the end of the forbearance period including lump-sum payments, increasing monthly payments, or adding extra payments to the end of your mortgage loan term. Since Fannie Mae and Freddie Mac are the largest mortgage financiers in the US, this coronavirus mortgage relief program is a significant one that will be felt by millions of property owners and real estate investors across the country.

There are a few conditions that apply, nonetheless. First of all, borrowers need to demonstrate financial hardship due to COVID-19 to be eligible for the 90-day mortgage relief. The borrower must also be current on monthly mortgage payments as of February 1st, 2020. In addition, owners of multifamily properties who receive mortgage reliefs can’t evict tenants for not paying their rent due to the coronavirus and can’t charge late fees due to the late payment of rent.

State Government Mortgage Relief Programs
Besides mortgage reliefs that the CARES Act has to offer, certain state officials across the nation have rolled out their own relief programs for borrowers whose mortgage loans aren’t backed by the federal government. Among these states’ officials is New York’s Governor Andrew M. Cuomo who allowed the Department of Financial Services (DFS) to issue an emergency regulation. The New York mortgage relief program requires state-regulated financial institutions to provide residential mortgage forbearance for a period of 90 days to any individual residing in New York who shows financial hardship as a result of the COVID-19 pandemic.

California’s Governor Gavin Newsom also announced that most major banks will provide mortgage relief to property owners, a development that will benefit independent rental owners suffering financially due to the coronavirus. The California mortgage relief program also requires financial institutions to not report late payments to credit reporting agencies for borrowers taking advantage of COVID-19-related relief. And for at least 60 days, financial institutions in California will not initiate foreclosure sales or evictions.

Likewise, Washington State’s Governor Jay Inslee announced a mortgage forbearance program that allows homeowners to delay mortgage payments for up to 12 months without interest. And finally, New Jersey’s Governor Phil Murphy has also announced a coronavirus mortgage relief program. Under the NJ mortgage relief program, eligible borrowers will receive a 90-day forbearance period for mortgage payments. Also, financial institutions in NJ will not report late payments nor initiate foreclosure sales or evictions for at least 60 days.

For real estate investors, we recommend staying updated on your state’s programs and reaching out to your lender directly to ask about what mortgage reliefs they currently offer.

Relief for Airbnb Short-Term Rental Owners
If you own a vacation home rental listed on Airbnb, you’ve likely felt the impact of the coronavirus pandemic as well. As travel restrictions and social distancing measures continue to take place, Airbnb hosts are dealing with decreased bookings. Recent Airbnb data from Mashvisor show that hosts are also facing a loss of rental income which many depend on to cover their monthly mortgage payments and other expenses. In an attempt to help cover some of the losses Airbnb hosts are facing due to the coronavirus, the company set up a few relief options, including a $260M Airbnb relief package for hosts.

Under this relief program, Airbnb hosts who face booking cancellations can claim 25% of what they would usually charge when guests with check-in dates between March 14 and March 31 cancel their stays due to the COVID-19 pandemic. Also, the company set aside an extra $10 million to help its “Superhosts” — those who are experienced, have high response rates and high overall rating scores. Airbnb Superhosts can apply for grants of up to $5,000 if they meet certain criteria, such as having a maximum of two active listings on the short-term rental site.

The Bottom Line
If you’re a real estate investor who’s worried about staying above water during the COVID-19 pandemic, you’re not alone. If the crisis is impacting your rental property business or even your ability to pay for your primary residence, there are many mortgage reliefs available to you in 2020. We highly recommend applying for and taking advantage of the programs that you may qualify for.

By now, you must be wondering how to apply for the CARES Act or other coronavirus mortgage relief programs. Every lender or servicer is different, but the most important thing to know is that you should contact your lender as soon as you think you need help. Don’t keep waiting until you miss a payment or until your mortgage payment is due. You may miss a payment and your lender will report it to the credit bureaus which will hurt your credit score. No one wants a missed mortgage payment to appear in their credit history. This is especially true for real estate investors who face stricter requirements when applying for an investment property mortgage loan. A missed payment can affect your ability to borrow more money for additional properties. So be smart and plan ahead.

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