Eviction and Mortgage
- Can I get relief on my mortgage if my tenant is not paying rent?
When a tenant is not paying rent, one option a landlord normally has is evicting the tenant. This allows another tenant to rent the property so payments to the property owner or landlord can continue.
However, the Governor of Washington’s COVID-19 response included a limitation on evictions and specifically prohibited evictions for nonpayment of rent. These restrictions were put in place to prevent an increase in homelessness and protect public health. The eviction restrictions began on March 18, 2020 and are currently in place until June 30, 2021. The information in this article generally applies to property owners and landlords in Washington state, however, some jurisdictions in Washington have additional laws and emergency orders that govern eviction and may be more restrictive.
While the eviction moratorium is in effect, a landlord may not begin eviction proceedings against a tenant based on their failure to pay rent.1 A loss of rental income combined with the inability to evict non rent paying tenants may make it difficult or impossible for a landlord to make mortgage payments on their rental properties or primary residence.
The federal government has provided some relief to property owners through the CARES Act, which can help borrowers with certain types of mortgages. CARES Act relief is also available to homeowners who do not own or operate rental properties. The CARES Act allows certain borrowers to place their mortgage in forbearance. When a mortgage is in forbearance the borrower may make a lower monthly mortgage payment or pause payments altogether for a set period of time.
The CARES Act mortgage forbearance provisions apply to property owners with federally backed mortgages. A federally backed mortgage is a loan owned, insured, or guaranteed by the VA, HUD, USDA, Fannie Mae, or Freddie Mac. To determine if your mortgage is federally backed, you can contact your mortgage servicer, which is the company or bank you send your mortgage payment to, or use online lookup tools provided by Fannie Mae and Freddie Mac.
While the CARES Act does not guarantee borrowers with non-federally backed mortgages can place their mortgage in forbearance, other relief options may exist. Many major banks and mortgage servicers have established processes to help lenders through economic hardship during the COVID-19 pandemic. These relief programs vary by lending institution and borrowers should contact their individual lender for additional details.
The deadline to request forbearance for loans backed by the VA, HUD, or USDA is June 30, 2021. There is currently no deadline to request forbearance for loans backed by Fannie Mae or Freddie Mac.4
- What is forbearance under the CARES Act?
When your mortgage is in forbearance you do not make the normal full monthly payment. 3 The exact amount of your revised monthly payment will depend on the agreement between you and your mortgage servicer, but you can suspend all loan payments during the term of your forbearance. During forbearance, your loan servicer may not charge you fees, penalties, or additional interest because you are not making your full regular monthly payment.3
There is no standard format for the forbearance request. Each request should be made to your individual loan servicer. If your mortgage is federally backed, your mortgage will be placed in forbearance upon your request.
It is important to note that interest on unpaid principal will continue to accrue at your mortgage’s normal rate during forbearance. Interest will also accrue on the loan’s principal that is not being paid down while your loan is in forbearance.3
Additionally, the CARES Act does not mandate deferral or reductions to homeowner’s association dues, property taxes, or other costs associated with your property. These costs may normally be paid with your monthly mortgage payment, but that does not mean they are automatically deferred if your mortgage is placed in forbearance. Property owners should discuss other fees normally included in their mortgage payment with their loan servicer, property tax assessor, or homeowner’s association to ensure these fees can be deferred or a method of payment is established.
Loan payments not made during forbearance are not forgiven. You will need to enter a repayment plan with your loan servicer that takes affect when your forbearance ends. Repayment options vary based on the type of mortgage and borrowers should review repayment options with their loan servicer. However, you will not be required to make a single lump sum catch up payment when your forbearance period ends.8
- Forbearance details for one to four family properties
Your property type will determine the forbearance protection that is provided by the CARES Act. If your property is designed for occupancy by one to four families, you have the right to a forbearance if your mortgage is federally backed. You will need to request a loan forbearance from your loan servicer and affirm that you are experiencing a financial hardship during the COVID-19 emergency.4 No other documentation is required beyond your attestation and you are not required to provide proof the COVID-19 pandemic is the cause of your financial hardship. Your initial forbearance request may be for up to 180 days and shall be extended, upon request, for an additional 180 day period.4
- Forbearance details for multi-family properties
Multifamily properties, which are properties designed for five or more families, may also have their mortgages placed in forbearance. However, the CARES Act provides slightly less protection for these properties. A multifamily property will only be eligible for mortgage forbearance if all loan payments were current as of February 1, 2020. The forbearance period for multifamily properties is initially up to 30 days. The forbearance period may be extended by up to 30 days a maximum of two times. As a result, the forbearance period for multifamily homes is up to 90 days. If these conditions are met, owners of multifamily properties with federally backed mortgages also have a right to a forbearance.
- What if my tenant can pay, but hasn’t?
Some property owners may be concerned that financially sound tenants are taking advantage of eviction moratoriums and other protections to avoid making full rent payments. Landlords may be wondering if they can force a tenant who has not lost income during the pandemic to make full rent payments. The short answer is no.
Unlike the federal eviction moratorium issued by the CDC, renters in Washington state are not required to make any declaration or attestation to their landlord concerning their income or financial status in order to receive eviction protection. Under the Governor’s current order, landlords in Washington state may not begin eviction proceedings and may not charge penalties for nonpayment of any rent due between February 29, 2020 and June 30, 2021.6 These tenant protections apply regardless of the tenant’s actual financial condition.
There is also no requirement that compels renters to use all or part of any economic impact payments, often referred to as stimulus checks, towards rent.
- Can I evict someone as soon as the moratorium expires?
When a tenant fails to pay rent, the eviction process begins when the landlord issues a fourteen day notice to pay rent or vacate. Once this notice is issued, the tenant has fourteen days to pay rent in full or vacate the premise.11 If rent has not been paid at the end of the fourteen day period and the tenant remains on the property, the landlord may proceed by filing an eviction lawsuit. In Washington, the eviction lawsuit is known as an action for unlawful detainer. It is important to note that the notice must be provided to the tenant before the eviction lawsuit can filed.12
While the Governor’s eviction moratorium is in place, landlords are prohibited from serving any notice of nonpayment, including a fourteen day notice to pay rent or vacate.1 This restriction stops the eviction process from beginning.
The Governor’s proclamation also requires landlords to offer tenants a “reasonable repayment plan” for missed rent payments due on or after February 29, 2020 if the reason for nonpayment was the pandemic.1 The “reasonable repayment plan” will not be required for payment missed after the COVID-19 state of emergency proclamation in Washington is complete.
Therefore, the earliest a landlord can issue a fourteen day pay rent or vacate notice is July 1, 2021. However, if this notice is issued because your tenant owes rent that was due between February 29, 2020 and June 30, 2021 you must have: (1) offered your tenant a “reasonable repayment plan” and; (2) they must have refused or not complied with the plan.
- What is a reasonable repayment plan?
The Governor’s eviction moratorium requires that a “reasonable repayment plan” consider the tenant’s financial, health, and other circumstances, but it does not provide additional clarification or define these terms.1 Instead, the Governor has delegated further definition of the “reasonable repayment plan” to the state legislature. However, the state legislature has not yet finalized what a “reasonable repayment plan” is.
At this time, draft legislation provides the best insight of what a “reasonable repayment plan” might look like. However, this bill is still a draft, the legislative process is not complete, and it has not been signed into law by the Governor. The bill can only provide an indication of how the legislature might define “reasonable repayment plan.”
The current version of the draft bill would limit the maximum charge for unpaid rent in a “reasonable repayment plan” to one third of the unpaid monthly rental cost. In other words, if your tenant did not pay rent in full for a period of time and the normal rent during this period was $1,500, you could charge a maximum of $500 per month until all outstanding debts were paid. This charge would be in addition to the rent your tenant owes for the current month. In this scenario, you would be able to bill the tenant $2,000 per month ($1,500 for the current month and $500 for past due rent).
The draft legislation would also restrict the repayment plan to missed rent payments and would not allow landlords to included late fees or other charges related to nonpayment.15
This bill is not finalized law and is highly subject to change. The bill can only give an indication as to the direction of the legislature and landlords should confirm with their attorney or trade organizations when the “reasonable repayment plan” is defined in Washington law.