March 27, 2020

CARES Act Provisions Affecting Bankruptcy And Residential Mortgage Loans

The Coronavirus Aid, Relief and Economic Security Act (“CARES”) enacted on March 27, 2020 contains a number of provisions affecting bankruptcy cases, modification and enforcement of federally backed residential mortgage loans, and evictions.

CARES Bankruptcy Provisions

  • Increase debt limit for eligibility to file for Chapter 11 relief under the Small Business Reorganization Act from $2,725,625 to $7,500,000.
  • Permit Chapter 13 debtors whose plans were confirmed prior to the enactment of CARES affected directly or indirectly by the COVID-19 emergency to request a modification of their plans to extend the repayment term to as long as 7 years.
  • Exclude payments made under Federal law relating to the national emergency declared by the President…with respect to the coronavirus disease from the calculation of disposable income for bankruptcy purposes.

CARES Federally Backed Mortgage Loan Provisions

  • Prohibit initiation of proceedings to foreclose on property securing a federally backed mortgage loan for not less than the 60-day period beginning March 18, 2010.
  • Require lenders to grant borrowers up to 180 days forbearance on federally backed mortgage loans if borrowers request forbearance and affirm that they are experiencing financial hardship, directly or indirectly, from the COVID-19 emergency and to grant up to an additional 180 days forbearance if requested.
  • Prohibit lenders from charging any fees, penalties, or interest beyond what would have been due if the borrower had made all contractual payments in full when due.

CARES Federally Backed Multifamily Mortgage Loan Provisions

  • Require lenders to grant borrowers up to 30 days forbearance on federally backed multifamily mortgage loans if borrowers request forbearance and affirm that they are experiencing a financial hardship, directly or indirectly, from the COVID-19 emergency and to grant no more than 2 additional forbearance periods of up to 30 days each as long as the request is made at least 15 days before the expiration of the forbearance period.
  • Prohibit borrowers on federally backed multifamily mortgage loans who are granted forbearance from initiating proceedings to evict tenants for nonpayment of rent during the forbearance period or charging any late fees, penalties or other charges to a tenant during the forbearance period.
  • Prohibit borrowers on federally backed multifamily mortgage loans from requiring tenants to vacate until 30 days after a notice to vacate has been given and prohibit a borrower who has been granted forbearance from giving such a notice during the forbearance period.

CARES Eviction Provisions

  • Bar initiation of proceedings to evict a tenant from property securing federally backed mortgage loans or federally backed multifamily mortgage loans for nonpayment of rent or charging tenants fees, penalties, or other charges related to nonpayment of rent for a period of 120 days after March 27, 2020.
  • Prohibit borrowers on federally backed mortgage loans or federally backed multifamily mortgage loans from requiring tenants to vacate until 30 days after a notice to vacate has been given and prohibit giving such a notice until after the 120 day eviction moratorium period has expired.