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Doing HUD Business During a Pandemic – Part II

The economic dislocation in general wrought by the COVID-19 pandemic and its singularly devastating effects on senior citizens in particular has posed multiple challenges for owners and operators of multifamily rental projects, nursing homes and assisted living facilities, and senior housing communities.

HUD is doing its part to assist owners and operators of such projects that have insured mortgage loans during these unprecedented times.

In April, they instituted a formal loan forbearance program for insured multifamily mortgage loans through the CARES Act.  Under the program, loan servicers must grant multifamily borrowers who were current on their loans on February 1, 2020 and who are experiencing financial hardships as a result of COVID-19 up to 90 days of forbearance when the borrower requests assistance.

While the CARES Act does not appear to include a similar forbearance option for healthcare mortgage loans, HUD will allow eligible borrowers to:

  • Suspend monthly deposits to be placed for replacement reserve through July 31, 2020, or longer if the authority to grant this benefit is extended. At the conclusion of the suspension period, the sum of such suspended payments shall be paid into the reserves for replacement in equal monthly increments over the next 12 consecutive months;
  • Use operating deficit escrow funds to make debt-service payments, subject to repayment provisions if any contained in the subject escrow agreement;
  • Use debt-service reserves to meet debt-service payments, subject to repayment provisions, if any, contained in the subject escrow agreement;
  • Use replacement reserves to meet debt-service payments required, so long as the reserve for replacement reserve account does not fall below $1,000 per unit.

These programs are designed to approve requests rapidly with minimal input from HUD.  Loan servicers can grant multifamily forbearance without direct HUD approval if they follow the protocol in HUD’s guidance. Similarly, the benefits available to healthcare borrowers do not require HUD review or approval, provided that HUD has not notified the servicer that the property in question is subject to review by the risk mitigation division. 

Contact us if you want more backstory on how HUD is being helpful to borrowers, and how they are conducting new business, during this very difficult time. 

We continue to wish you and your families the best and hope that you are staying safe.