DC Council Approves Temporary Relief for Borrowers and Tenants
The COVID-19 Supplemental Act aims to expand on measures already taken by the Council to protect residents experiencing financial hardship as a result of the COVID-19 pandemic. The update below summarizes Sections 202 and 203 of the COVID-19 Supplemental Act, which, among other things, provides relief by requiring mortgage servicers to defer mortgage payments for those affected by the public health emergency and by freezing residential rent increases during the public health emergency.
Section 202 – Mortgage Relief
Section 202 of the COVID-19 Supplemental Act provides guidelines that mortgage servicers of either residential or commercial loans under the jurisdiction of the District of Columbia’s Commissioner of the Department of Insurance, Securities, and Banking must follow until 60 days after the end of the emergency period declared by the Mayor. Under Section 202, these mortgage servicers are required to develop a deferment program that:
- grants a 90-day deferment period of mortgage payments for borrowers;
- waives any late fees or other fees that may accrue during the pendency of the COVID-19 pandemic; and
- does not report delinquent or derogatory information to credit bureaus.
The borrowers will make the deferred mortgage payments at (A) a reasonable time agreed to by the borrower and the servicer, or (B) if no reasonable time can be agreed – the earlier of (i) five years from the end of the deferment period, or (ii) the end of the original term of the mortgage loan.
Other notable provisions in Section 202 include:
- this Section will not apply to a property for which a mortgage servicer initiated a foreclosure action or exercised its right to accelerate the balance and maturity date of the loan, on or before March 11, 2020;
- a borrower whose application for deferment is denied may file a written complaint with the Commissioner of the Department of Insurance, Securities, and Banking; and
- during the mortgage deferment period, any landlord borrower receiving a deferral will be required to reduce the rent of its tenants at a rate proportionate to the reduced mortgage amount paid by the borrower to the mortgage servicer.
A related provision in Section 208 of the COVID-19 Supplemental Act prohibits debt collectors from initiating any communication with debtors during the public health emergency, and for 60 days after its conclusion, except for those attempting to collect a debt which is owed on a loan secured by a mortgage on real property.
Section 203 – Tenant Protections
Section 203 of the COVID-19 Supplemental Act provides protection to residential tenants in the District by tolling the time period available for residential tenants to exercise their rights until 30 days after the conclusion of the public health emergency and by freezing rent increases for that same period.
Tolling of Time Periods for Residential Tenants and Tenant Organizations
The running of all time periods for residential tenants and tenant organizations to exercise rights will be tolled for the entirety of the public health emergency, and for 30 days thereafter. The tolling will also apply to notices of intent to vacate that a residential tenant provided prior to the declaration of the public health emergency, meaning that the residential tenant will have the same number of days to vacate remaining at the end of the public health emergency as the residential tenant had remaining upon the effective date of the public health emergency. This measure was implemented to ensure that residential tenants who had intended to terminate their lease before the public health emergency retain housing during lock-down.
Voiding of Rent Increases During Public Health Emergencies
Rent increases for residential tenants will be void, depending upon the date of the notice and when the notice purports to take effect. If the effective date on the notice occurs during a period of the public health emergency, or 30 days thereafter, the rent increase is void. The rent increase is also void if the notice was provided during the public health emergency or if the rent increase takes effect following the public health emergency. Further, rent increases for residential properties that are not prohibited by the Rental Housing Act of 1985 will also be prohibited during the public health emergency, and for 30 days thereafter.