By Axel Schiemann, Marco Bonasso, Rob Moulton, Pia Naib
Several countries have announced or have already implemented extensive debt relief measures for consumers and companies. In some instances these measures also include debt moratoria. The following provides a brief overview of key headlines reflecting the current status for such debt moratoria in Germany, Italy, UK, and the US.
The German government plans to implement a three-month debt moratorium on consumer loans. The draft law, inter alia, provides a moratorium of payment obligations under consumer loan agreements which are due before 30 June 2020 for three months if the consumer is not able to make the payments as a result of the COVID-19 pandemic.
The Italian government has introduced a six-month debt moratorium. The Italian Covid-19 Law Decree introduced, inter alia, large-scale moratorium measures on debt repayments, including mortgages, to support families and enterprises during the exceptional emergency situation resulting from the COVID-19 pandemic.
The UK government ministers and the FCA are encouraging lenders to provide “payment holidays” to those with a mortgage (i.e., a home loan) and clarify that lenders should resist repossessing homes unless the client has agreed that it would be in their best interests to do so.
President Trump ordered foreclosures and evictions to cease for 60 days across the US: The Federal Housing Finance Agency, Housing and Urban Development, United States Department of Agriculture, Fannie Mae, and Freddie Mac all have announced a freeze on foreclosures and evictions for at least 60 days as well as forbearance or disaster relief options for homeowners who cannot afford their mortgage payments.
On March 21, New York Governor Andrew Cuomo issued Executive Order No. 202.9: Continuing Temporary Suspension and Modification of Laws Relating to the Disaster Emergency which, in part, provides that it will be deemed an unsafe and unsound business practice if, in response to the COVID-19 pandemic, any bank which is subject to the jurisdiction of the New York State Department of Financial Services (NYSDFS) does not grant a forbearance for 90 days to any person or business who has a financial hardship as a result of the COVID-19 pandemic. The NYSDFS issued emergency regulations on March 24 that limits the scope of the order to individual borrowers unable to meet residential mortgage loan payment obligations due to financial hardship as a result of COVID-19. Banks that are subject to the jurisdiction of the NYSDFS include banks chartered under New York Banking Law and branch offices of non-U.S. banks that are licensed under New York Banking Law.
In addition, the federal banking agencies (the Federal Reserve, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation) — along with the Consumer Financial Protection Bureau, the National Credit Union Administration, and the Conference of State Banking Supervisors — released an interagency statement on March 22 to encourage banks to work prudently with borrowers who may be unable to meet contractual payment obligations as a result of the COVID-19 pandemic.
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