HUD, USDA issue mortgage relief for MFH, Healthcare facilities

Regulation | April 17, 2020 | by Juliana Bilowich

On April 13, HUD published three mortgagee letters with forbearance and underwriting options for all FHA approved Multifamily mortgages, Section 223(f) Multifamily Housing projects, and Section 232 Healthcare Facilities. On April 17, USDA's Rural Development issued forbearance guidance for Section 538 Guaranteed Loans.

Following the enactment of forbearance relief and other flexibilities in the CARES Act, HUD implemented forbearance protocols nd underwriting adjustments for multifamily mortgages, Section 223(f) mortgages, and Section 232 Healthcare Facilities. USDA's Rural Development issued forbearance options for Section 538 Guaranteed Loans, which complements previously-released Section 515 forbearance guidance.

For borrowers utilizing forbearance options, the CARES Act prohibits evictions due to non-payment of rent for the next 120 days and does not allow owners to charge late fees or otherwise penalize tenants who are unable to pay rent. This eviction prohibition became effective upon enactment of the CARES Act (March 27, 2020) and is effective for 120 days for HUD programs and for USDA Section 514, Section 515 and Section 538 loans, as well as Multifamily voucher holders. 

For FHA approved Multifamily mortgages, HUD is implementing a standard forbearance protocol to reduce paperwork and streamline processing for multifamily borrowers, servicers, and lenders. This protocol follows the provisions of the CARES Act. These guidelines are in effect during the covered period of the CARES Act, which begins March 27, 2020 and continues until the earlier of the termination date of the national emergency declared by the President on March 13, 2020 or December 31, 2020.

2020-09: Implementation of the Coronavirus Aid, Relief, and Economic Security (CARES) Act Forbearance

For HUD Section 223(f), the letter states that HUD has reevaluated its underwriting requirements. The letter discusses debt service requirements for projects with new Low-Income Housing Tax Credits, and in particular the borrower availability and adequacy of investor lease-up and operating deficit reserve requirements.

2020-11: Section 223(f) Underwriting Mitigants for Multifamily Housing Projects Due to Economic Impact of COVID-19 Emergency

For HUD Section 232 Healthcare Facilities, the letter discusses efforts to help assure the continued effectiveness of the program in facilitating the construction, rehabilitation, purchase and refinancing of residential care facilities despite the limitations on third-party site access brought about by the COVID-19 Pandemic. The flexibilities provided are effective April 10, 2020.

2020-10: Interim Procedures to Address Site Access Issues Related to Section 232 Mortgage Insurance Applications During the COVID-19 Pandemic

For USDA Section 538 Guaranteed Loans, Rural Development outlined forbearance options and provided a sample borrower certification of hardship and forbearance agreement. During the covered period, a multifamily borrower with a USDA Section 538 guaranteed mortgage loan experiencing a financial hardship due, directly or indirectly, to the COVID-19 emergency may request a forbearance in accordance with CARES Act. For Section 538 loans with subordinate Section 515 loan(s), the borrower should request suspension of reserve for replacement account deposits and/or additional releases from the reserve for replacement account from their Multifamily Servicing Official. Borrowers are welcome to submit the sample request to their lender, or they can submit requests orally or in another written format to their lender; lenders are welcome to utilize the sample forbearance agreement or one of their own drafting.

RD Announcement 4/17/2020: Section 538 Forbearance Guidance

To view all of HUD’s mortgagee letters, click here. To view Rural Development's Section 538 guidance, click here