Urban Institute (UI) recently held a webinar with housing experts to look at distress
in the housing market. In a report on the findings, researchers Jung
Hyun Choi and Daniel Pang say that, as of November, 3.7 million homeowners who had
taken advantage of forbearance as the pandemic began have left the programs
while 3.2 million others continue to struggle. About 2.8 million remain in
active forbearance while another 369,000 are delinquent on payments but are not
in plans. Many of those in active forbearance
have reached their sixth month, requiring them to either leave their plans or
request an extension.
reports there are many households which are delinquent but have not pursued any
loss mitigation. There is a lack of homeowner awareness of payment options, and
stark disparities in housing payment status by race, ethnicity, and income.
participants identified three priorities for policymakers, mortgage servicers,
and financial institutions to help struggling homeowners.
first is outreach to those borrowers who are delinquent but are not in forbearance.
About 775,000 homeowners have fallen behind in their payments since the
pandemic began and 299,000 of them were never in forbearance while 476,000
became delinquent after they exited it. Eighty-five percent of those are
working with their servicers, but 40,000 have not entered loss mitigation. UI
says, this number will likely grow when the maximum 12 months of forbearance
expires in the spring.
webinar panelists, Dana Dillard of Housing Finance Strategies and Lisa Rice of
the National Fair Housing Alliance pointed out that many households are facing
multiple issues – health, struggling with their kids schooling, worried about
employment. Even if servicers try to communicate and ease loss mitigation for
clients, the process can still be complicated and repayment options
solution could be housing counselors. Those approved by the Department of
Housing and Urban Development were able to assist borrowers during the
foreclosure crisis and Ellie Pepper of the National Housing Resource Center said,
with adequate funding, they could do the same in this crisis.
broader public awareness campaign could help homeowners who are in distress but
not taking advantage of the help that is there. Efforts are being made, but the
Housing Policy Council’s Meg Burns said better data is needed about who these
borrowers are and where they are located. Information is especially lacking in
the private-label securities space.
second need is to prepare for the wave of homeowners still in forbearance to
exit this spring. They are likely to be in worse financial shape than those who
exited earlier. They tended to be borrowers who continued to make payments
during forbearance and those with Fannie Mae or Freddie Mac loans. The remaining 2.8 million will need additional
support. About 23 percent of them say they don’t know if they will have to make
higher monthly payments or bring their loans current in one-lump sum.
Fifty-four percent said they have little or no confidence that they will be
able to resume monthly payments when forbearance ends.
said these numbers showed the need for a better communications plan from the
industry. Various unique financial situations will affect how much borrowers
can afford to pay each month. Diane Thompson of the National Consumer Law
Center stressed that forbearance and repayment options should be clear and
streamlined to avoid confusing servicers and consumers. She also emphasized the
need for better government standards to bring clarity to the market.
third need is to address the existing inequalities. Data show that households
of color and those with lower incomes are more likely to fall behind on their
housing payments. Inequalities that existed before COVID-19 could worsen
as the pandemic continues.
offered solutions to address these racial and economic disparities, such as
halting negative credit reporting and strengthening antidiscrimination laws. Among
other proposals were:
Establish a “COVID-19” bond. These would be like
the baby bonds suggested by Senator Cory Booker (D-NJ). A $1,000 initial endowment
would be provided to every newborn. Family income would be the basis for additional
contributions to the child’s endowment. It would be held by the U.S. Treasury
until the child is a young adult when it could be used to invest in an asset,
such as education or a home. The COVID-19 bond would provide direct funding to
those who have been hit hardest by the pandemic.
Automatic forbearance for those who become 60
days non-current on their loans. Thompson early intervention is often more
effective in helping households get back on track.
Provision of more direct financial support to
consumers during the crisis. Data shows that consumers have used unemployment
benefits and stimulus checks to make both mortgage and rental payments.
the panelists said it is important to tell the human stories behind the data.
Linking the data and families through a compelling narrative is the best way to
reach a wider audience and drive change.
also said there will be other crises and it is not helpful for the housing
industry to reinvent ad hoc responses each time. “Vulnerable homeowners deserve
better policies and systems to enhance their financial resilience to weather
COVID-19 and future crises,” UI says.