Housing provisions in the Corona Aid, Aid and Economic Security Act (CARES)
- The Coronavirus Aid, Relief and Economic Security (CARES) Act is a $ 2 trillion stimulus package that has a significant impact on housing and almost every other aspect of the economy.
- Those with federal loan-backed mortgages can apply for a six-month mortgage deferral; Tenants of apartments who receive this omission cannot be evicted, nor be subject to any fees or penalties for non-payment of rent.
- The CARES Act provides the Department of Housing and Urban Development (HUD) with $ 5 billion in additional funding for Community Development Block Grants (CDBG) as well as additional funding for housing programs to support communities at risk.
In light of the economic and social disruption caused by the coronavirus, Congress has passed three laws to combat the virus and its effects. It passed first two major response packages Meet health sector needs and support American families. On March 26, the “Phase 3” stimulus package, the Coronavirus Aid, Relief and Economic Security (CARES) Act, ( signed in law. With an estimated $ 2 trillion Price tag is the third package of the largest and perhaps most significant stimulus package in American history.
This article summarizes the effects of the CARES Act specifically on housing.
Department A – Wage and employment security, improvement of the health system and economic stabilization
Title IV – Economic Stabilization and Aid for Badly Troubled Sectors of the US Economy
The main focus of Title IV is that it empowers the Treasury Department to provide $ 500 billion in loans directly to coronavirus-affected companies (for an analysis of the CARES law’s impact on financial services, see Here). However, the title also includes a number of seemingly distinct sections with a much broader focus, ranging from reforming the governance of Federal Reserve meetings to facilitating bad debt restructuring for banks. This title has three sections with an impact on the housing market.
Section 4022. Moratorium on Foreclosures and Consumer Injury Right
Single-family homes secured with a federal mortgage loan can apply for a deferral of up to one year.
For the purposes of this section, “single family home” means homes designed for one to four families, and a “federal mortgage loan” means a loan given by a federal agency, most obviously the Federal Housing Administration (FHA) or the Department or Veterans Affairs . Any borrower who is in direct or indirect financial distress in connection with the coronavirus can apply for a 180 day deferral regardless of their default status. This period can be extended by a further 180 days at the request of the borrower. No fees or interest will be charged to the borrower during this period.
Additionally, as of March 18, 2020, federal mortgage servicers will not be able to initiate foreclosures or evictions for a minimum of 60 days. This restriction does not apply to vacant or abandoned properties.
Section 4023. Deferral of Mortgage Loan Payments for Apartment Buildings with Government Supported Loans
This section extends the forbearance options available to single-family borrowers to include borrowers in apartment buildings, such as apartment buildings. However, this forbearance makes additional demands; Borrowers must be aware of their payments and must not cancel a tenant or charge tenants late fees or other penalties during the waiver period. Multi-Family Forbearance will also end either at the end of the national emergency or December 31, 2020, whichever comes earlier.
Section 4024. Temporary moratorium on eviction actions
120 days after the law comes into force (March 27, 2020), landlords of any property secured with a federal mortgage loan cannot vacate tenants or levy fees or penalties for non-payment of rent.
Department B – Emergency Resources for Coronavirus Health Response and Agencies Operation
Title XII, Housing and Urban Development Department
Department B sets additional funding for agencies to improve agencies’ preparedness in the face of the coronavirus threats. These sums include additional funding for the Ministry of Housing and Urban Development (HUD).
Under the CARES Act, states will receive an additional $ 5 billion in funding for the Community Development Block Grant (CDBG) program. The CDBG program is one of the longest running examples of HUD aid, providing funding for community development activities to provide affordable housing. Block grants differ from categorical grants in that they are less specific and allow states far more discretion in their use.
The CARES bill also provides additional funding of $ 4 billion for homelessness grants, $ 1.25 billion for tenant-based rental assistance, and $ 685 million for public housing. and people with AIDS.
This title also provides $ 35 million for the HUD, which will be available through Aug.
The CARES Act has two major effects on housing. First, it provides significant relief for federal loan-backed mortgage holders in the form of six-month forbearance and immunity from evictions or late rental fees. An exception to the CARES Act is the consideration of the credit service providers themselves, who could suffer a six-month loss of income from their entire federal loan portfolio. It must be assumed that this industry will receive help within the framework of Title I and IV of the CARES Act, with coronavirus discharge via the Small Business Administration (SBA) or the Ministry of Finance. Second, while it will welcome increased funding for the CDBG program, particularly from countries that have a wide margin of maneuver in the use of these funds, it will remain an operational challenge to distribute this aid quickly and nationally.