April 1, 2020—As the COVID-19 situation continues to evolve around the world, it continues to affect the real estate industry in a myriad of ways. The recently signed CARES Act has provisions that may help you and your real estate clients through the financial impact of the pandemic. These provisions include recovery benefit payments of $1,200 per adult and $500 per child (for those that qualify), an expansion to unemployment that covers independent contractors and others not normally covered, and new small business relief loans.
Here are some tips and information you can share with your clients:
For Real Estate Clients Worried About Paying a Mortgage
With uncertainty around delayed or missed paychecks, concern over paying bills is rising. You can reassure your real estate clients by encouraging them to reach out to lenders to seek forbearance programs for their mortgage, likely your client’s largest monthly expense.
- Let real estate clients who bought a home with federally backed loans through Fannie Mae, Freddie Mac, FHA, or USDA know that if the COVID-19 pandemic has led to financial issues they can request forbearance for up to 180 days. If they apply and are approved, the lender will postpone payments without fees or penalties.
- Let real estate clients who bought a home through a private lender know that many banks and financial institutions will work with them to suspend payments or adjust terms.
- Remind your real estate clients to check on state programs and declarations. In addition to federal programs, some states are issuing waivers on mortgage payments for the short term.
For Real Estate Clients in the Rental Market
Buyer clients who are temporarily renting will be concerned over slowdowns and new disclosure processes in the buying process. It’s important for buyer clients to consult a real estate attorney for any legal advice on a transaction in progress that is stalled by closed offices or subject to changing disclosures. CRES members can also consult our CRES ClaimPrevent® Hotline for guidance in transacting within these changing situations.
For clients with concerns about maintaining rent, let them know that the CARES Act places a moratorium on eviction of renters if the property owner has a mortgage backed by a federal program, such as Fannie Mae or Freddie Mac. In addition, such landlords can not place penalties on renters who do not pay their rent during the term of the moratorium (120 days from the signing of the bill).
The CARES Act also increases funding to the Department of Housing and Urban Development (HUD) to help with rent assistance and other housing costs such as senior housing and housing vouchers. Sharing this information with clients who are renting and with landlord clients is equally helpful to both rental parties.
Clients who own rental property must be aware of moratoriums on evictions if they have a federally backed mortgage. Note that states may have stricter or more expansive guidelines about rent and eviction, so encourage them to also check with new state regulations or consult with a real estate attorney.
For Real Estate Clients Concerned About Their Credit Rating
Even for people not in the buying process right now, credit rating effects and future ability to secure credit due to reduced income, job loss and delayed bill payment is a real concern. Remind clients that taking advantage of payment adjustments available under the CARES Act will not negatively impact credit scores. Lenders are instructed to keep credit files marked as ‘current,’ for payments that are deferred or adjusted in accordance with provisions of the bill. That said, it’s important to inform clients to keep a watchful eye on their credit reports, as reporting agencies can make mistakes. Recommend that clients check with their lender or financial advisor at the time of payment adjustments to ensure they are well informed about any implications (or lack of).
For Small Business Clients
With shutdowns and stay at home directives in place in many locations, small businesses are feeling the hit. Many have pivoted and adapted to keep revenue streams open, but still face significant losses. Small businesses can apply for loans through the Small Business Administration’s Economic Injury Disaster Loans program, now that the COVID-19 pandemic has been classified as a disaster, and the program has been expanded. Business should also look into emergency grant cash advances. For your commercial, small business clients let them know that using the money for specific reasons, including mortgage or lease payments, and payroll, they may qualify for loan forgiveness. Apply here: COVID-19 ECONOMIC INJURY DISASTER LOAN APPLICATION
Resources for You and Your Real Estate Business
We’re committed to helping you understand risks to your business and steps you can take throughout this crisis: COVID-19 Resources for Real Estate Professionals. Do you have legal questions about the impact of COVID-19 on your real estate business practices or specific client situations? CRES clients should use our CRES ClaimPrevent® Hotline, available 7 days a week. You will receive a response from an experienced real estate attorney, and every recommendation is confirmed in writing. That’s solid protection for you and your clients.
What questions and concerns are you hearing from your real estate clients?