On June 29th, 2020 the House passed a bill known as H.R. 7301: Emergency Housing Protections and Relief Act of 2020. The bill's goal is to provide the millions of Americans who are struggling to pay their mortgage and rent with financial relief and certain protections from eviction and foreclosure as CARES act memorandums begin to expire.
What the bill proposes
The bill would allocate $100 billion dollars to emergency rental assistance specifically to those at risk of homelessness, which could include offering financial assistance for rent or rent-related costs to those who qualify on a short- or long-term basis. The bill also includes a $75 billion Homeowners Assistance Fund that provides financial relief to homeowners facing potential delinquency or foreclosure due to Coronavirus.
Additionally, the bill would have a Temporary Moratorium on Eviction filings, which prevents landlords from evicting tenants for non-payment of rent or for charging late fees for up to 12 months after the bill is passed. After the 12-month period has expired, landlords must provide a 30-day notice to vacate.
Changes were also made to the forbearance and foreclosure moratorium for mortgage loans, providing protections to all "covered loans" rather than only loans federally backed, such as a VA or FHA loan. This clause would grant automatic 60-day forbearance for all borrowers whose loan became 60 days or more past due after March 13, 2020 to 12 months after the date of the enactment of the bill, with options to shorten or seek alternative loss mitigation for their loan to make it more affordable. It would also prohibit lenders from starting or proceeding with any eviction or foreclosure process for up to six months after the enactment of the Emergency Housing Protections and Relief Act of 2020.
How it could impact investors
According to the Bureau of Labor Statistics, the unemployment rate was 11.1% in June, with 31.4 million people claiming some type of unemployment benefits as of June 13th, 2020. This bill would undoubtedly offer assistance to those in need, but for a period of time it could place a large financial burden on property owners, lenders, and noteholders -- particularly those who are in high-rent metro markets or who may have a tenant who does not apply for financial assistance through the grant but rather elects to wait until the automatic protection periods expire. It would also affect any loans that were previously in foreclosure from being able to proceed with the process, even if it was unrelated to COVID-19.
One positive to this bill is that it includes billions of dollars of assistance to homeowners and renters in need to receive financial assistance to help continue to pay rent or home-related costs. Rather than simply canceling rent or mortgage payments, this allows landlords and lenders to receive the mortgage or rent. The challenging part is that not all tenants and homeowners will qualify and the timeline to review applications and distribute funds is unknown, putting lenders and landlords in a tough position with investment-related expenses.
While it still has to go through the Senate and be signed by the president before becoming law, this bill could impact real estate investors in a large way if passed and would surely bring a unique set of rules to adjust to in the coming months.
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