Multifamily Capital

Memorandum-GSE ForbearanceTo:
Subject:
Date:

Multifamily Capital Clients
New GSE Forbearance Agreements
April 10, 2020

In order to provide you with the most up-to-date information available with respect to the Fannie Mae and Freddie Mac
Forbearance Programs, the following supplements the information contained in our earlier memo of April 2, 2020. In
addition to greater definition provided by the agencies, since that time the CARES Act has been passed which contains
certain requirements which possibly have an effect on multifamily property owners and borrowers of GSE loans including
forbearance and obligations with respect to eviction of tenants.
Please note that while the following information is what is available to date, circumstances are very fluid and changing
almost daily. While Wells Fargo will endeavor to continuously update you, we encourage you to review with legal counsel
this memorandum, the CARES Act and any other local and state law or other government restrictions which may be
applicable to your circumstances. Wells Fargo is not in a position to represent or to advise you on those matters which
specifically affect your properties and its operations.
The GSE Forbearance Programs have been established for the purpose of assisting Borrowers in need of significant
financial assistance specifically as a result of COVID-19. Requests for relief will be carefully reviewed and must be
reasonable and fit the circumstances of the property and the Borrower. You are encouraged to fund cash shortfalls andrequest forbearance only if needed to continue business operations. Requests for forbearance in anticipation of difficulty
cannot be accepted and conditional approvals are unavailable.
In order to qualify for the programs, (i) the loan must be in good standing which requires that all payments are current
through the date on which forbearance will become effective and there must be no other default pursuant to the loan
documents and (ii) the Borrower must clearly demonstrate that the property has suffered a substantial decline inoperations as a result of financial hardship due to tenants’ inability to pay rent which results from the effects of COVID-19.

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Requests for Forbearance
Upon meeting the qualifications noted above, the Borrower may make a request for forbearance by email tomftransactions@wellsfargo.com . Note that at this time, there will be no on-going discussions regarding your loan and therequest submitted should be limited to the three-month forbearance programs only.
a) You must keep in mind your timing of requests for forbearance. It is important that you evaluate your situation and at
the time a request is submitted, cash flows must be inadequate to cover debt service for the first month for which you
require forbearance.
b) Requests must be submitted at least 10 days prior to the date on which forbearance commencement is requested.
Upon receipt of a full package containing the foregoing requested documents, Wells Fargo Asset Management will
evaluate the package as promptly as possible and you will be advised in writing of approval or denial. If denied, you will
be provided with the reasons for such decision. Upon approval, our counsel will prepare for execution the necessary
Forbearance Agreement. Note Forbearance Agreements are non-negotiable. The forms of Forbearance Agreements
may be obtained directly from the applicable websites listed below.
c) The 90 day forbearance period starts with the date which will be set forth in the Forbearance Agreement itself. ForFannie Mae, the commencement may be for any month between May and August and for Freddie Mac, any month
between May and December. Please note that Freddie Mac requires that any Forbearance Agreement itself beexecuted on the earlier of the termination of the National Emergency declared by the President of the United Statesand December 21, 2020. At this time, Fannie Mae has not published such a deadline.
d) Requests must initially include the following:

2i.

A letter of “hardship” providing notice of the period for which forbearance is requested. The letter should include
a complete narrative of the impact of COVID-19 on the property and its operations. The letter should include a
description of the specific reasons for the request, the tenant employment concentration and employment
status, number of tenants who have advised of their inability to pay rent as a result of COVID-19, number oftenants who have indicated that they intend to stop rental payments, employment and retention status ofproperty employees, status of pending eviction actions and any other information you feel is relevant for review;ii.

A delinquency and forbearance report demonstrating the effect on the property’s operation and performance;iii.

A 2019 year-end operating statement (if not already provided);iv.

A certified year to date operating statement and anticipated changes in financial position;v.

A current rent roll and certified month to date collection report;vi.

A description of what steps you will take during the forbearance period to protect and maintain the property;vii.

Name and contact information for counsel or other party to receive documents for execution; andviii.

Any other information which may support your request.

April 2020 | Memorandum-GSE ForbearanceTerms of Forbearance
The terms of forbearance are set forth in the Forbearance Agreements but below are the salient terms:a) The Borrower must repay the total unpaid obligations, without late charges, additional interest or prepayment
premiums, over the ensuing 12-month period or a shorter period if the Borrower chooses. Such repayment is in addition
to the regular monthly payments due.
b) The Borrower must agree that during the forbearance period, it will not initiate eviction actions based solely on nonpayment of rent by residential tenants occurring as a consequence of the COVID-19 emergency, whether caused byillness, job loss, reduced hours, temporary unpaid leave or similar circumstances and will not continue eviction actions for
non-payment commenced prior to the commencement of the forbearance period. Freddie Mac and Fannie Maecurrently have differing provisions regarding termination of this covenant. See below.
c) All cash flow and revenues must be used for normal operating expenses with no distribution to the sponsor or principalsof the Borrower. Fannie Mae has additional requirements with respect to excess cash flow. See below.
d) All other terms and conditions contained in the Loan Documents will remain in full force and effect.
Forbearance Terms Applicable To Specific GSE
There are certain terms set forth in one or the other Forbearance Agreements and the primary differences are set forthbelow. Borrowers and/or their legal counsel should review the documents thoroughly to understand the terms andrequirements of each agency’s program.
Freddie Mac Only:a) Borrower must remain current with all tax, water, sewage or other such bills as they become due, unless the Borrower
has obtained written forbearance relief from such authorities. [Note: while this covenant is not contained in the Fannie
Mae Forbearance Agreement, it is required by the Loan Documents]b) Within three business days after any material change or impact to Property operations due to COVID-19, Borrower will
provide written updates regarding the change and how this has affected Borrower’s financial condition, tenants and/oroccupancy of the Property. Each written update will include a statement that the information submitted by theBorrower is true, accurate and correct.
c) Should the local taxing authorities offer real estate tax relief and Borrower elects such relief, Borrower must advise theLender of the terms and conditions prior to accepting such relief.
d) With respect to the suspension of any eviction of tenants for non-payment, such prohibition ends upon completion of
the forbearance period (90 days).

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April 2020 | Memorandum-GSE ForbearanceFannie Mae Only:a) Notwithstanding the 12 equal payment repayment schedule, Borrower shall bring the Loan current upon receipt ofbusiness income (business interruption/rent loss) insurance proceeds or upon receipt of any other financial relief orassistance available to Borrower from any other source, including, but not limited to, any local, state, or federal
government assistance or relief program.
b) With respect to the suspension of any eviction of tenants for non-payment, Fannie Mae’s prohibition shall be effective
for the longer of: (i) the eviction moratorium in Section 4024 of the CARES Act (120 days after the enactment of theCARES Act), (ii) the months of actual payment forbearance, or (iii) as otherwise required by applicable law.
c) For each month through the end of the forbearance period, Borrower is required to remit to Lender, no less frequently
than monthly, all net operating income from the Property. See the Fannie Mae forbearance agreement for additionaldetail.

As this situation continues to evolve, please note that the Forbearance Program requirements or procedures are subject tochange. In addition to the updates that we will provide, you may also access the information on the GSE websites:
https://mf.freddiemac.com/COVID-19/
https://multifamily.fanniemae.com/multifamily-covid-19
Please reach out to your Wells Fargo Multifamily asset management contact for any additional questions.

4April 2020 | Memorandum-GSE Forbearance