The COVID-19 Pandemic’s Effect Upon Foreclosures and Evictions

As the personal and financial toll of the COVID-19 pandemic spreads, federal, state and city governments are cracking down on their citizens’ movements and have ordered residents into semi-isolation.  Whether referred to as “shelter-in-place” or “stay-at-home” orders, these orders generally require citizens to avoid all nonessential travel and stay inside their homes or residences. The side-effect of these orders is that “nonessential” businesses, as well as many categories of what would typically be considered “essential” businesses (such as dine-in restaurants), are suffering significant financial distress.  In addition to having to live with the uncertainty associated with their personal health and safety and the health and safety of their loved ones, the owners and employees of those affected business have borne the brunt of financial impact of the pandemic.

It is possible that those currently feeling the financial impact of the pandemic constitute the “tip of the iceberg” of that financial impact and, the federal, state and county governments are taking steps to protect those who have lost, or will lose, their incomes from also losing the roofs over their heads.  Below is a list of the measures that governments have put in place to protect property owners and renters:

Federal Relief Measures

On March 18, 2020, President Trump ordered the Department of Housing and Urban Development (“HUD”) to suspend all evictions from HUD housing for a period of sixty (60) days.  The order also suspended foreclosures of mortgages insured by the Federal Housing Administration (“FHA”) on single-family homes.  Official statements and press coverage may have misled many of you regarding the scope of this order.  Its actual scope is fairly limited, applying only to those residing in HUD, low income, public housing and those mortgages insured by the FHA.

On a broader scale, the Federal Housing Finance Agency (“FHFA”), which oversees Fannie Mae, Freddie Mac and the Federal Home Loan banks, has suspended certain foreclosures and evictions for at least sixty (60) days and is offering payment forbearances to borrowers impacted by COVID-19 for up to twelve (12) months.  The suspension of foreclosures and evictions applies to homeowners with a Fannie Mae or Freddie Mac-backed single-family mortgage.  FHFA has provided no specifics as to what type/level of impact is required to obtain a forbearance, but borrowers are instructed to contact their servicer to discuss setting up a forbearance plan.

State Mortgage Relief Measures

With the federal relief programs being fairly limited at this point, some states have taken it upon themselves to implement relief measures for property owners and tenants affected by the pandemic.  While not an all-inclusive list of those measures, the following provides a summary of the steps being taken by the states:

California

A statewide moratorium on evictions and foreclosures stalled as a result of the Legislature’s recess resulting from the COVID-19 outbreak.  Nevertheless, on March 16, 2020, California’s Governor issued an executive order that authorized local governments to halt evictions and slow foreclosures and requesting that financial institutions implement a moratorium on foreclosures (both residential and commercial) and related evictions.  Executive Order N-28-20 stopped short of actually ordering a halt, or even a slowing, of evictions and/or foreclosures, but simply authorized local governments (counties and cities) to pass laws which suspend evictions and foreclosures against those affected by the pandemic.

Several of California’s cities, including Los Angeles, San Francisco, Culver City, Fresno, Oakland, Sacramento, San Diego, San Jose and Santa Ana have either passed, or in the process of passing, temporary moratoriums on residential evictions.  In addition, some counties, such as Kern, are also discussing placing moratoriums on evictions. These moratoriums do not mean that residential renters are not required to pay rent or that missed rent payments will be forgiven, they simply delay a landlord’s ability to evict during the pandemic (typically that includes evictions for rent payments missed prior to the COVID-19 outbreak).  While most of the moratoriums contain similar language, there are differences in each jurisdiction’s orders, and we recommend a thorough analysis of the order applicable to your jurisdiction.

It is estimated that the federal relief programs will benefit 65% of mortgages, California jurisdictions have not yet taken substantive steps to protect residential homeowners who do not possess an FHA insured, Fannie Mae or Freddie Mac loan.  While the eviction moratoriums discussed above may delay the eviction of a homeowner with a non-protected mortgage, there are currently no legal measures in place to stop, or even delay, a foreclosure on those properties.  Nevertheless, financial institutions are offering relief to mortgage customers affected by the pandemic.  Ally, Bank of America, Citibank and other lenders, are allowing customers affected by the pandemic to defer payments (some up to 120 days).  We recommend that, if you have been affected by COVID-19, you contact your lender to determine whether a relief program is available and its eligibility requirements.

While some of California’s local jurisdictions have moved quickly to protect residential tenants, we have seen less movement with regards to commercial tenants or commercial borrowers.  Governor Newsom’s order requested that commercial lenders implement a moratorium on evictions and foreclosures, but there is nothing requiring them to do so and, therefore, businesses, even those in the most hard-hit industries, have little protection at this time.  Nevertheless, it is possible that, like the residential relief program discussed above, lenders may be willing to offer relief to those businesses affected by the pandemic.  As such, we recommend you contact your commercial loan lender to discuss potential payment deferment.

Nevada

While statewide, no moratorium on evictions or foreclosures has been announced.  On March 17, 2020, the Las Vegas Justice Court suspended all eviction proceedings for thirty (30) days.  Similarly, on March 19, 2020, the Justice Courts in Reno and Sparks issued substantively similar orders.  The courts will revisit whether to further suspend eviction proceedings at the end of the thirty (30) day period.  Landlords may continue to file eviction complaints during the suspension, but no orders of eviction will be granted during the suspension.

Texas

Similar to Nevada, the Texas Supreme Court has blocked most eviction hearings and trials for thirty (30) days.  On March 19, 2020, the court placed a moratorium on all eviction proceedings until April 19, 2020 other than those evictions premised upon imminent threat of physical harm or criminal activity.

Conclusion

The measures taken to deal with the quickly evolving COVID-19 pandemic remain in their early phases and, as the pandemic’s economic impact spreads, we at TALG anticipate that additional measures will be taken by jurisdictions to counter a potential flood of evictions and foreclosures.  The list relief measures included above is subject to change because, at the time of its writing, several jurisdictions are working on similar measures.