With hundreds of Floridians losing their jobs on a daily basis and the economy on crutches, Florida Gov. Ron DeSantis suspended evictions and foreclosures for a period of 45 days. But experts say it is far from enough.
The move, announced on Thursday, allows homeowners and renters to stay in their homes if they can’t pay their mortgages or rent due to Covid-19. It follows similar emergency orders issued in New York and in California by the U.S. Department of Housing and Urban Development.
Yet, attorneys say the governor’s executive order does not provide long-term help for people who have lost their jobs and are struggling to get by. It also doesn’t help landlords abate mortgage payments from their lenders.
“It is nice that the governor is protecting people from losing their space,” said attorney Josh Migdal, a partner at Miami-based Mark Migdal & Hayden. “However, it doesn’t change the fact that there will be defaults, and it is only a temporary band-aid.”
The delays, in fact, could lead to a stream of evictions in a month and a half, when lenders start filing foreclosure actions on borrowers who have lost their jobs and are unable to pay rent. In tourism-dependent South Florida, hospitality owners have already laid off thousands as their industry takes a beating. And more distress may be in store in the coming months.
Attorney Sebastian Jaramillo, a partner with Miami-based Wolfe Pincavage law firm, said there will be a “huge flood of cases” when the order is lifted, leading to courts being overwhelmed. More than 200 evictions are typically filed daily in Miami-Dade County alone, Jaramillo said.
“We are anticipating a significant amount of payment defaults,” said attorney Jay Sakalo, a partner with Bilzin Sumberg’s business finance and restructuring group. “There is going to be calamity on the payment side.”
The action could have a major impact on landlords who are seeking to rent out their residential properties for income. In South Florida, many condo owners put their units on the so-called shadow market for rent. The market was already facing challenges due to the influx of new apartment complexes that are competing directly with condo rentals, causing some unit owners to offer sharp discounts.
Jaramillo said it will hurt property owners who count rental income as their sole source of income. The executive order will also lead to a drop in refinancings of investment properties, since that income is no longer a sure bet.
“Lenders may start cutting back on that type of refinancing,” he said.
In South Florida, many traditional lenders such as Miami-based Apollo Bank and Conway, Arkansas-based Centennial Bank are now offering 90-day deferrals on mortgage payments to borrowers. Others are modifying loans by asking for more collateral or interest reserves.
The $2 trillion stimulus package passed by Congress also provided a number of programs that are supposed to help ailing renters and small businesses owners. Among them is the Paycheck Protection Program (“PPP”), which gives up to $349 billion in forgivable loans to small businesses to pay their employees during the COVID-19 crisis. There have been few indicators yet that banks are seeking to foreclose.
“I have talked to a lot of our bank clients and they are gearing up for payment deferrals, in some cases up to six months,” said Joe Hernandez, a real estate attorney with the law firm Weiss Serota, who mainly deals with clients on the commercial side. “The regulators have made it clear that they are going to be supportive.”
Attorney Bruce Jacobs of Miami-based Jacobs Legal, who represents homeowners in the foreclosure process, warned, however, that many banks will eventually demand full payment. And that will probably lead to an onslaught of foreclosures – likely greater than the last recession, he said.
“In the last crash in 2008, people were told to ‘stop paying your mortgage and we’ll help you,’ Jacobs said. “And then people didn’t pay their mortgage, and at some point the bank filed for foreclosure.”
He sees a similar situation playing out now.
“If you don’t pay your mortgage or don’t pay your rent, even Gov. DeSantis’ order says you still owe that money.”