Time is Running Out for Multifamily Owners That Received Forbearance

Temporary mortgage forbearance was a critical stopgap for multifamily property owners during the pandemic, particularly for smaller, non-institutional mom-and-pop owners, according to a new report from the Government Accountability Office. 

In the pre-pandemic days of 2020, the FHA and RHS reported having no multifamily loans in forbearance—but by June, thanks largely to a provision of the CARES Act requiring servicers to provide up to 90 days of forbearance for multifamily properties with federally backed mortgages, about 7.3% of loans backed by the agencies and enterprises were under a forbearance agreement. That number began a slow decline for the remainder of the year, with Fannie Mae and Freddie Mac reporting in December that about 0.4% and 2.3% of their respective total unpaid balances for multifamily loans were in forbearance.

Forbearance rates were highest among smaller properties, with 5.4% of FHA- or enterprise-backed properties with five to nine units under forbearance, as opposed to about 1.% among properties with 50 or more units.  

But with multifamily forbearance and eviction moratoriums running out this year, multifamily borrowers will need to move fast for their tenants to receive rental assistance funds if they’re still struggling to make their own payments. Once the forbearance period ends, owners generally have to start repaying the amount immediately and within 12 months, and while some owners have allowed tenants to repay accrued rent over time, others may not have had the financial resources to make up for an extended period of missed payments.

Earlier this month, the FHA announced that both Freddie and Fannie will extend multifamily forbearance for qualifying owners through June 30, 2021. The program was previously scheduled to expire on May 31. That’s good news for owners who have seen declines in rent collections in Q1: in December, according to National Multifamily Housing Council data, nearly 90% of tenants made a full or partial payment, but by January, that number fell to 79.2% of respondents in a survey of 11.6 million units.