Legal Alert

Washington, D.C.’s COVID-19 Response Supplemental Emergency Amendment Act and Implications for Mortgage Loan Servicers

by the Real Estate Finance Group
April 21, 2020

Commercial landlords and lenders and servicers for commercial real estate loans should be aware of recent legislation out of the District of Columbia that imposes obligations on servicers to develop and implement deferral programs.

District of Columbia Mayor Muriel Bowser signed D.C.’s COVID-19 Response Supplemental Emergency Amendment Act (Supplemental Act) on Friday, April 10. It was unanimously passed by the D.C. Council on April 7. The Supplemental Act expands upon COVID-related matters that were addressed in D.C.’s initial COVID Act, which took effect on March 17, 2020. (See the Supplemental Act).

Under Section 202 of the Supplemental Act, commercial and residential landlords are required to reduce rent for their tenants if (a) the landlord receives a mortgage deferral under D.C.’s mortgage loan deferral program (described below), and (b) the tenant notifies the landlord of its inability to pay all or a portion of the rent due to the public health emergency. For the period that the mortgage deferral is in place, the tenant’s rent shall be reduced in an amount proportional to the reduced mortgage amount paid by the borrower to the mortgage servicer. The landlord may require the tenant to repay the amount of any reduced rent without interest or fees within the earlier of 18 months or the end of the lease term.

In connection with the foregoing rent reduction provision, the Supplemental Act requires that servicers under the jurisdiction of the Commissioner of the Department of Insurance, Securities and Banking provide a mortgage loan deferment program for any borrower that demonstrates financial hardship due to the pandemic. The Commissioner has jurisdiction over D.C.-chartered financial institutions and financial institutions conducting business in D.C. under the D.C. Banking Code, as well as mortgage loan originators, loan officers, mortgage lenders, and mortgage brokers. The Commissioner currently is taking the position that all lenders and servicers servicing loans in D.C. are subject to the Supplemental Act.

At a minimum, the deferral program required by the Supplemental Act shall (i) grant 90-day deferment of borrower mortgage payments, (ii) waive late fees, processing fees and other fees accrued during the public health emergency, and (iii) not report to a credit bureau any delinquency or other derogatory information as a result of the deferral. A mortgage servicer shall approve a borrower’s request for deferment if the borrower demonstrates financial hardship resulting directly or indirectly from the public health emergency and agrees in writing to pay the deferred amount within a reasonable time agreed-to in writing by borrower and the servicer or the earlier of five years from the end of the deferment period and the end of the original term of the mortgage loan. Mortgage servicers are required to establish application procedures for borrower to apply for deferrals. These deferral applications must be made available online and by telephone.

In addition, D.C.’s emergency legislation provides for the following:

  • Commercial and residential evictions are stayed.
  • Landlords cannot charge late fees to residential tenants during any month that the emergency is in effect.
  • Landlords cannot increase rents for residential tenants that take effect during the period that the public health emergency is in place (commenced March 11, 2020) and for 30 days after the emergency ends. Any rent increases that were noticed or intended to take effect during the emergency are nullified.

Ballard Spahr continues to monitor updates and guidance that may be forthcoming with regard to the deferment program.


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This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.



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