UPDATE ON ENTERPRISE (FANNIE/FREDDIE) ANNOUNCEMENT

Mark Zinman | Zona Law Group

Over the past month, there has been a lot of press in our industry that "Fannie and Freddie End CARES Notice Enforcement." While this sounds like a great step forward, it is important that managers understand clearly what this is and what this is not.

This does NOT repeal the CARES Act and this does NOT remove the requirement for landlords to comply with the 30-day notice requirement, where applicable. An executive agency (like these enterprises) cannot change federal law. Until the CARES Act is repealed or amended, or until a federal court rules it unenforceable, management companies must continue to comply with the CARES Act requirement. Courts in Arizona will continue to enforce the 30-day notice requirements as they have been doing and failure to comply could result in your case being dismissed.

In March, 2020, the CARES Act was enacted at the beginning of the COVID-19 pandemic. In a surprise to everyone, it included a temporary eviction moratorium, and further provided that owners and managers would be required to serve 30-day notices before pursuing evictions. Unfortunately, the language was written horribly and did not have an expiration date associated with this notice requirement. Therefore, 5 years later, property managers must still comply with the 30-day notice requirement, even though the pandemic is over.

In August, 2021, Fannie Mae and Freddie Mac published their supplement (ruling) that required lenders to notify borrowers of their obligation to comply with all laws, including the CARES Act, related to multifamily properties. Banks had to tell owners of their obligation to comply with the CARES Act. The ruling also provided mechanisms for enforcement.

Now, four years later, Fannie and Freddie have rescinded that supplement and have stated that they would no longer enforce the notice requirements upon lenders.

Importantly, Fannie and Freddie did not change the law and did not change the CARES Act requirements. They only changed their position on their enforcement of the law. In fact, they specifically wrote that "This retirement does not change: the Borrowers' ongoing obligation to comply with all provisions of applicable Loan Documents, including provisions regarding compliance with all laws applicable to the Property..."

In other words, owners and managers must still comply with the CARES Act requirements, and comply with the 30-day notice requirement where applicable. This supplement merely means that the enterprises won't enforce the rules. However, courts will continue to do so, until the law is changed or until a federal court strikes down that portion of the CARES Act.