What happens to homeowners and landlords when the
federal, state, and local protections put in place during the pandemic go away?
The Consumer Financial Protection Bureau
(CFPB) is warning that the answer is hanging in the balance.

Moratoria on
foreclosures and evictions coupled with widespread availability of forbearance
plans have held disaster at bay, but CFPB says 2.1 million families are behind
at least three months on mortgage payments, and another 8.8 million are behind
on rent. The aggregate 11 million represent 10 percent of total U.S. households.
Homeowners alone are estimated to owe almost $90 billion in missed payments.
The last time this many families were behind on their mortgages was during the
Great Recession.

“Put simply,” the report says, “we
have very little time to prevent millions of families from losing their homes
.”

CFPB Acting Director Dave Uejio says,
“I am deeply concerned that a mass wave of evictions and foreclosures will turn
millions of families out on the streets. Such an event will not only be a
humanitarian and public health disaster but will have repercussions throughout
the housing sector and our economy at large.

“It’s common sense that safe,
affordable, and stable housing provides the foundation for people’s well-being,
financial and otherwise. Stable homes mean stable neighborhoods and
communities. When people lose their homes, their lives, health, and finances
are all disrupted. Even the threat of losing a family’s home can force
tough financial decisions, including skipping payments on food, medicine, and
heat to keep a roof over their head.”

This danger is
much higher in certain communities. The ban on evictions is generally available
only to tenants in properties held in real estate owned (REO) portfolios
belonging to Fannie Mae and Freddie Mac (the GSEs), the Federal Housing
Administration (FHA), Department of Veterans Affairs (VA), and the U.S.
Department of Agriculture (USDA). In some cases, owners of multifamily
properties financed by those agencies are also prevented from evicting
non-paying tenants.

Nine percent of renters, who do not
have the same protections or options as homeowners, say that they are likely to
be evicted.
Black and Hispanic households are more likely to report being at
risk.

The 2.1 million homeowners who are
more than 90 days in arrears on mortgage payments will probably experience
severe financial hardship when forbearance ends. Of these families, an estimated
263,000 families are seriously behind on their mortgages and not in
forbearance, putting them at higher risk of foreclosure once federal and state
moratoria end.

Many families, particularly in Black
and Hispanic communities, have not fully recovered from the last financial
crisis
, more than a decade ago. And those same communities are once again
bearing a disproportionate financial and health burden during the pandemic,
through no fault of their own. Black and Hispanic families are more than twice
as likely to report being behind on housing payments than white families.

Twenty-eight percent of manufactured
home residents are behind on their housing payments, compared to 12 percent of
single-family home residents, and 18 percent of residents in small-to-mid-sized
multi-unit buildings.

The Acting Director says, given its
roots in the aftermath of the Great Recession, CFPB is uniquely equipped to
address the current looming housing crisis and, where possible, will use its
authority to keep people in their homes. It will also try to coordinate public
and private efforts to save homes and attempt to prevent the weight of this
crisis falling upon communities which are already struggling. “In those
unfortunate instances where families can no longer stay in their homes, we will
do everything we can to ensure that people are treated with dignity, families
are able to preserve as much of their equity as possible, and everyone can make
a smooth transition to other safe, secure, and affordable housing.”

Lenders, landlords and mortgage
servicers are also working to keep people in their homes. Lenders realize the
chaos of the last housing crisis wasn’t good for their bottom line, either.
Most mortgage servicers are reaching out to the record number of homeowners in
forbearance and other homeowners struggling to make payments. Many landlords
have dipped into their own savings or run up credit card debt to cover expenses
during the pandemic.

The report notes that Federal
Housing Finance Agency, FHA, VA, and USDA have extended most of the pandemic
relief measures through at least June 30, 2021.
After that date, families who
cannot resume making regular payments will need to make an agreement with their
lender to avoid foreclosure. Residential eviction protections for renters are
extended through March 31, 2021.

Uejio says it is a priority to get a
firm picture of the crisis and he has directed CFPB research teams to increase
efforts to track mortgage performance metrics and evictions. “We need to know
more about homeowners and communities to help them overcome the inevitable
financial impacts of a crisis of this magnitude. While there are significant
differences compared to the last mortgage crisis, including a more stable
mortgage market and substantial homeowner equity, we need to know more.

“We don’t know if the most
vulnerable communities, hit the hardest by COVID-19 and its financial impacts,
have sufficient equity to buffer them from the consequences of extended
forbearances and job loss. Cascading foreclosures in a neighborhood can bring
down housing values, shrinking equity. Families hit hardest by the pandemic and
its financial impacts may not be able to find adequate alternate and safe
housing, even if they are able to sell their homes without losses. The scale of
housing insecurity among both renters and homeowners presents new risks to
families and the communities they live in. We will be working hard to
understand these interlocking risks.”

By Jann Swanson , dated 2021-03-02 10:28:24

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Courtesy of Mortgage News Daily

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