Executive Actions Provide Limited Mortgage, Rental, and Student Loan Relief

As negotiations for a further comprehensive stimulus package drag on in Congress, US President Donald Trump on August 8 signed two executive actions—a combination of a memorandum and an executive order—that purportedly extend various aid measures previously provided through the Coronavirus Aid, Relief, and Economic Security (CARES) Act, or impose additional economic relief measures for homeowners, renters, and student loan borrowers impacted by the coronavirus (COVID-19) pandemic.

Relief for Homeowners and Renters

As we discussed in prior publications (read our All Things FinReg posts here and here), to address the significant adverse impacts of COVID-19 on consumers and the economy, the CARES Act provided relief from evictions for certain types of renters, subject to certain conditions. Prior to the CARES Act’s passage, the secretary of the US Department of Housing and Urban Development implemented a foreclosure and eviction moratorium for all single-family mortgages insured by the Federal Housing Administration (FHA). Also prior to passage, the Federal Housing Finance Agency (FHFA) announced that it had instructed the Federal National Mortgage Association and Federal Home Loan Mortgage Corporation (the GSEs) to suspend foreclosures and evictions on GSE-backed, single-family mortgages. The CARES Act relief has now expired, and the FHA and FHFA moratoriums are set to expire on August 31.

In the Executive Order on Fighting the Spread of COVID-19 by Providing Assistance to Renters and Homeowners, President Trump states that he seeks “to minimize, to the greatest extent possible, residential evictions and foreclosures during the ongoing COVID-19 national emergency.” Moreover, the Trump administration will “do all that it can to help vulnerable populations stay in their homes in the midst of this pandemic.”

Accordingly, the executive order states the following:

1. The Secretary of Health and Human Services and the Director of the Centers for Disease Control and Prevention shall consider whether any measures temporarily halting residential evictions of any tenants for failure to pay rent are reasonably necessary to prevent the further spread of COVID-19 from one State or possession into any other State or possession.
2. The Secretary of the Treasury and the Secretary of Housing and Urban Development shall identify any and all available Federal funds to provide temporary financial assistance to renters and homeowners who, as a result of the financial hardships caused by COVID-19, are struggling to meet their monthly rental or mortgage obligations.
3. The Secretary of Housing and Urban Development shall take action, as appropriate and consistent with applicable law, to promote the ability of renters and homeowners to avoid eviction or foreclosure resulting from financial hardships caused by COVID-19. Such action may include encouraging and providing assistance to public housing authorities, affordable housing owners, landlords, and recipients of Federal grant funds in minimizing evictions and foreclosures.
4. In consultation with the Secretary of the Treasury, the Director of FHFA shall review all existing authorities and resources that may be used to prevent evictions and foreclosures for renters and homeowners resulting from hardships caused by COVID-19.

The executive order does not provide any details on what measures will be taken, nor does it guarantee that the existing or previous protections for renters and homeowners will be extended. On its face, the executive order does not reinstate the CARES Act’s temporary moratorium on evictions that expired last month. Rather, it primarily makes suggestions to certain federal agencies and calls for those agencies to “consider” whether evictions should continue to be halted.

The immediate effect of this action is uncertain. While the executive order does not appear to give the agencies listed above any more authority than they already had, we will have to wait for those agency actions to see what the actual effect is. Ultimately, both individuals seeking relief and the real estate industry will have to wait for further announcements.

Student Loan Payment Relief

Currently, the White House has not issued the executive order that the president announced regarding student loans. However, it has released a memorandum for the secretary of the US Department of Education (DOE) that relates to loans held by the DOE.

On March 20, 2020, the Trump administration took action to provide relief to federal student loan borrowers during COVID-19 by both suspending loan payments and temporarily setting interest rates to 0%. The original announcement of this policy specified that it would continue for at least 60 days, but in the interim, the CARES Act provided this same student loan payment relief, scheduled to expire on September 30, 2020.

The memorandum states that the DOE secretary shall continue the suspension of loan payments and 0% interest rate for federal student loan borrowers provided for by the CARES Act until December 30, 2020, and that it is “appropriate to extend this policy until such time that the economy has stabilized, schools have re-opened, and the crisis brought on by the COVID-19 pandemic has subsided.”

Takeaways

• As President Trump acknowledged at his news conference announcing these measures, these actions leave unaddressed multiple critical needs and economic relief measures related to COVID-19.
• It remains to be seen whether these executive actions will actually be carried out, and some or all of them will likely be challenged in court and by Congress (in part because they at least appear to take away some of Congress’s most fundamental, constitutionally mandated powers—tax and spending policy).
• Many believe that a fourth stimulus package is still necessary, and some would expect negotiations to reconvene, but when—or if—that happens is up in the air.

We will provide further details as they are made available. 

Contacts

If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:

Dallas
Michael A. Cumming
David I. Monteiro

New York
Martin Hirschprung