Major multi-family lender rolls out rent relief program for out of work tenants

by Clayton Jarvis27 Apr 2020

With May 1 drawing near and the U.S. economy having lost an incredible 26 million jobs in the last few weeks, stakeholders in the multi-family space are scrambling to develop measures to assist their newly unemployed tenants.

With most states and counties implementing some form of no-eviction notice since the arrival of COVID-19, and landlord-tenant boards closed across the country, the risk of these tenants winding up homeless is virtually nil. But the risk of unemployed renters depleting their resources during the crisis and emerging from it destitute is real.

Preventing those negative outcomes will require work on the part of both landlords and lenders. A new initiative from Arbor Realty Trust hopes to create just such a partnership. How successful it will be remains to be seen.

Arbor, one of Fannie May’s 10 largest multifamily lenders, announced the launch of a $2 million rental assistance program for tenants who have lost their jobs due to their states’ COVID-19 mitigation efforts. By advancing May and June payments that renters can repay once they’re back to work, the program aims to provide some level of assurance for tenants of multi-family buildings and much needed capital for those properties’ owners by advancing May and June rent payments.

“The next few months will be very difficult for many renters whose incomes have been significantly impacted by COVID-19,” Ivan Kaufman, Arbor’s president and CEO told HousingWire in an email.

Arbor, in its effort to “leverage private capital to protect the multi-family ecosystem”, plans on contributing $1 million to the program. The other 50% of funds are slated to be provided by participating property owners, who will be required to invest at least $10,000 into the program. (They can contribute a maximum of $100,000.) Property owners must also assist tenants in completing their online application forms.

Owner buy-in will prove to be the program’s biggest sticking point. With many Americans having already asked for some form of rent relief for March, multi-family owners may find scraping together $10,000 for the fund, even though they clearly see the benefit to themselves, to be somewhat of a big ask. And if a tenant lives in an Arbor-financed building but the owner does not contribute to the fund, that tenant will not have access to the program.

Mortgage Professional America asked Arbor to comment on the interest they’ve received from owners but received no response.

The company expects the application review process to take 48 hours. Once an application is approved, the advanced payment goes directly to the property owner and the tenants then have up to three years to repay their May and June rents at zero interest. Arbor estimates that the program could help as many as 3,000 renters.

If successful, Arbor’s rent relief program may serve as valuable inspiration for other innovative lender-owner initiatives aimed at mitigating the effects of the COVID-19 shutdown. Otherwise, it’s back to the drawing board for everyone involved, and June 1 isn’t that far away.