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Watch List - Proposed Rent and Mortgage Cancellation Act of 2020 Suspends Payments During Pandemic but Requires Landlords and Lenders to Meet Severe Criteria if They Seek Repayment
April 20, 2020
On April 17, a bill was introduced in the United States House of Representatives seeking to create the Rent and Mortgage Cancellation Act of 2020. The primary feature of the bill is it would suspend all rent and mortgage payments due during the COVID-19 pandemic, beginning on April 1, 2020 and ending 30 days after the termination of the pandemic by the Federal Emergency Management Agency. The tenants and mortgagees would have no responsibility to ever make those payments.
In addition to cancelling their payments, renters and mortgagors would be provided additional protections by provisions in the bill prohibiting landlords and lenders/mortgagees from taking certain related actions against them. More specifically, during the period of suspended payments, no tenant or mortgagor may be charged a fine or a fee for nonpayment. With regard to rent payments, nonpayment cannot be a ground for terminating the tenancy or evicting the tenant. After the conclusion of the pandemic, no tenant may be held liable for repayment of any suspended rent payments. The nonpayment of rent shall not be reported to a consumer reporting agency or used to adversely affect a tenant’s credit score. 
With regard to mortgagors and mortgage payments, no mortgagor may be held responsible for any suspended payment. A mortgagee is prohibited from commencing or continuing any judicial foreclosure action or non-judicial foreclosure process or any action for failure to make a payment. No fees, penalties, or additional interest beyond the amounts normally scheduled and calculated to be incurred may be imposed on the mortgagor. Nonpayment shall not be reported to a consumer reporting agency; nor shall such nonpayment adversely affect a mortgagor’s credit score.
Any individual aggrieved by any action that violates the bill would be permitted to bring a lawsuit within two years after the violation occurred to recover actual damages and penalties. The amount of the penalties is severe. A landlord’s or mortgagee’s first violation carries a penalty of $5,000. A second violation carries a penalty of $10,000. Any third or subsequent violation carries a penalty of $50,000 or forfeiture of the property. In addition, a prevailing plaintiff is entitled to an award of attorney’s fees. A later provision also gives the United States Attorney General the power to bring a civil action for violations of this bill.
The bill addresses how landlords and lenders/mortgagees are to be compensated for the lost payments. Section 4 of the bill creates a Landlord Relief Fund, and Section 5 of the bill creates a Lender Relief Fund. Broadly speaking, a landlord or lender must apply for reimbursement payments from a fund and must submit a certification and a binding agreement that limits their actions in the future. With regard to landlords and tenants, the landlord must agree to the following for a five-year period:
  1. It will not increase the amount of rent it charges;
  2. Tenants may only be evicted for “just cause” and only pursuant to advance written notice;
  3. The landlord will not refuse to rent or discriminate against someone on the basis of the source of that person’s income;
  4. The landlord will coordinate with public and other housing authorities to fill any new vacancies;
  5. The landlord will not restrict any person from renting on the basis of sexual identity or orientation;
  6. Any arrearage that is owed at the end of the five-year period will be forgiven;
  7. No retaliation will be taken against any tenant; and
  8. The landlord will not report any tenant to any credit reporting agency. 
Lenders or mortgagees also must apply for reimbursement payments, and their application must include a certification and a binding agreement that, for a five-year period, they agree to report annually to the Secretary of HUD (1) detailed information regarding their loans and borrowers and (2) information regarding their efforts at outreach and referral of borrowers. 
In the event the owner of a dwelling that houses five families or more wants to sell that dwelling, the owner is prohibited from selling or transferring ownership of that dwelling unless it follows a procedure to allow an “eligible purchaser” to apply to the Secretary of HUD for assistance in purchasing the property. Eligible purchasers are defined as nonprofit organizations, public housing agencies, cooperative housing associations, community land trusts, and a state or unit local government or agency thereof. The bill would create an Affordable Housing Acquisition Fund in order to provide money to eligible purchasers to permit them to purchase the dwelling.    
Like other provisions in the bill, before the eligible purchaser can qualify for assistance from the Affordable Housing Acquisition Fund, it must agree to several requirements, namely:
  1. It must qualify as affordable housing under Section 215(a) of the Cranston-Gonzalez National Affordable Housing Act;
  2. It will only evict tenants for “just cause” and only pursuant to advance written notice;
  3. I will not discriminate against a tenant on the basis of the source of that tenant’s income;
  4. It will not restrict admission based on sexual identity or orientation;
  5. It will provide free, voluntary support services to help “those experiencing chronic homelessness or housing instability, including access to healthcare, employment or education assistance, childcare, financial literacy education, and any other community-based support services, as the Secretary shall require”; and
  6. The tenants of the dwelling “shall have control of living and operating conditions in the [dwelling] through a democratically elected resident board or council.” 
Several provisions in the bill mandate that if a landlord or eligible purchaser violates any of its provisions, the Secretary is required to recapture from them the total amount of assistance provided to them.
In sum, this bill, like others before it, seeks to address how individuals will pay for housing during the COVID-19 pandemic. Unlike other bills, however, it adopts an extreme approach of canceling rent and mortgage payments and conditions a landlord’s and lender’s ability to obtain payment from the government on the acceptance of multiple requirements for the next five years. If any of those measures are violated, the penalties are severe, leading up to the possible loss of the property. Finally, if the owner of a multi-family dwelling wishes to sell his or her property, it must first allow the government to provide assistance to a non-profit or housing authority to purchase the property. If that is purchase is successful, several additional requirements are triggered limiting how the purchaser can operate the property. 

If you have any questions, please contact our COVID-19 Task Force.

Banking & Finance Law Nicholas P. Mooney II