Virus Wave Causes Some Extensions Involving Moratoriums for Evictions and Foreclosures
In a prior Tip (see these Tips by Mark Lee Levine, as noted below), we addressed the concern with many tenants—commercial and residential—being in default under their lease, along with debtors under mortgages being unable to pay their mortgage payments. These events were the direct result of COVID 19 (C-19) and the pandemic of fear it generated, resulting in many businesses closing and thus, many employees losing their employment. Concomitant with these losses, many small businesses (and large) have found themselves unable to meet their business/ financial commitments, such as payroll, rent, utilities, taxes and other such business expenses. A failure to generate net income from the business, possibly because the business was forced to close, in turn meant that business owners were unable in many instances to pay their obligations. Such defaults have caused an increase in bankruptcies, unemployment, and other defaults.
We are aware of these horrible results caused by the pandemic. However, these losses were labeled as “temporary.” With government assistance via loans, grants, payroll protection plans, and the prior moratoriums on evictions and foreclosures, the prognostication was that such employees would soon be back to work; businesses would soon be open again; and income streams would soon start generating the cash needed to “get back on track” and make rent payments, mortgage payments, employee payments, etc.
Sadly, the optimism felt by many, “knowing” this virus issue was “only temporary,” have turned out to be wrong. Many of those out of work may still be out of work. Many tenants remain unable to meet their rent obligations; and, many debtors under mortgages or deeds of trust have also not been able to meet their loan payment obligations.
What now? It appears that the moratoriums that were to have expired or did expire in June and July, for example, are now being extended in many settings. But, not all tenants, employees, and debtors have been provided this additional extension relief.
In one article in Affordable Housing Finance (7/13/2020), the article (https://www.housingfinance.com/news/wave-of-evictions-feared-as-moratoriums-end_o), entitled “Wave of Evictions Feared as Moratoriums End,” the essence or concern was captured in the title of the piece. The author noted that there are about 19 to 23 million renter households that are at risk of eviction by the end of September 2020.
Many of the prior moratoriums on evictions have or will expire very soon. Another article noted that 30 states have already ended their eviction moratoriums; 10 more states are ending in August 2020. (https://www.dwell.com/article/when-state-city-eviction-moratoriums-expire-46341fce)
The states in darker blue are those that will end their moratoriums after 8/31 or the end of the Declared Emergency of the Virus; the light blue shows states that end between 7/1 and 8/31/2020. However, the immediate concern is with the yellow states, which have no rule or they ended the moratorium by 7/1/2020. (See ProPublica.org for this map.)
If the moratoriums expire, the evictions will skyrocket. If the moratoriums are extended, what does this do to those owners of properties that are relying on the rent payments to make their own payments on loans owing and other expenses on the properties in question?!
Many of the above positions will be changed by pending legislation or executive orders. However, the concern remains for tenants, landlords and lenders, among others. Some governmental bodies and quasi-governmental bodies are attempting to help those in jeopardy under the above default patterns. However, there is not enough support to protect all those parties that are adversely impacted by the defaults, the moratoriums and related issues.
The key to solving these concerns is the end of the pandemic. The date for this event remains uncertain. Thus, businesses, real estate and others, face an uncertain future as to these issues related to loan moratoriums and rent moratoriums.
Dr. Mark Lee Levine,
Professor, University of Denver