MBA, Coalition Urge Homeowner Relief in COVID-19 Package
The Mortgage Bankers Association and nearly 300 other industry trade groups and community organizations urged Congress to include direct assistance to homeowners with COVID-19 hardships in any upcoming economic stimulus package.
President Joseph Biden Jr. submitted a $1.9 trillion coronavirus relief package shortly after his inauguration Jan. 20. House and Senate Democrats, who have majorities in both chambers, are expected to “fast-track” the legislation with minimal input from Republicans, who have thus far indicated they prefer a smaller package.
The letter specifically ask that Congress include $25 billion for direct assistance to homeowners with COVID-19 hardships, who disproportionately represent communities of color hurt most by the pandemic, with the bulk of the funds deployed through state housing finance agencies through the Homeowner Assistance Fund and including at least $100 million for housing counseling and $39.7 million for the Fair Housing Initiatives Program.
“The COVID-19 pandemic and ensuing economic crisis are devastating homeowners, particularly in communities of color which have not yet recovered from the 2008 Great Recession,” the letter said. “While CARES Act and COVID-related forbearance by servicers has provided breathing room for many homeowners, this assistance does not cover those whose homes are at risk due to tax foreclosure, past-due homeowner association fees and other threats to home retention.”
MBA notes there are currently 3.8 million homeowners who are past due on their mortgages; more than half of these homeowners are people of color, according to Census Bureau Household Pulse Survey data for the period January 6-18. Black and Hispanic mortgage holders were more than twice as likely as white homeowners to report being late on their mortgage.
“Mortgage payment assistance will be critically important to the nearly 3 million borrowers that remain in long-term forbearance plans from their mortgage servicers,” the letter said. “While forbearance provides a temporary bridge for borrowers experiencing hardships, exiting long-term forbearance will be a challenge for those borrowers whose incomes have not recovered to pre-pandemic levels. Recent homebuyers that relied on low- or no-down payment loans from FHA, VA or the Rural Housing Service are at particular risk, as even six months of forbearance can put borrowers underwater on their mortgages, owing more than their home is worth. Moreover, these borrowers are predominantly Black and Latinx families, first-time buyers and low- to moderate-income families.”
The letter said the Homeowner Assistance Fund, modeled on the Hardest Hit Fund created a decade ago, would enable state housing finance agencies to help homeowners with COVID-19 hardships, including providing direct assistance with mortgage payments, helping people get into affordable loan modifications and assisting with utility payments, property tax and insurance payments, home owner association dues and other support to prevent the loss of home equity, mortgage delinquency, default, foreclosure, or loss of utility services.
“The Black homeownership rate today is as low as it was in 1968 when the Fair Housing Act was passed,” the letter noted. “We cannot begin to tackle the racial homeownership and wealth gaps if we do not take steps to prevent a wave of COVID-induced foreclosures and loss of home equity.”
The letter also supports additional funding for HUD-approved housing counseling agencies and legal assistance, as they both play essential roles in helping homeowners avoid foreclosure. “HUD-approved housing counseling agencies play a critical role in ensuring homeowners get the individualized help and relief they need to stay in their homes, including through effective communication with their servicer and addressing credit and financial challenges as a result of the pandemic,” the letter said.
“A critical lesson of the Great Recession is that the communities most impacted need targeted, early intervention,” the letter added. “Acting now to include these key provisions in the pending COVID-19 relief package will help stem what could be a damaging housing crisis in the U.S. concentrated in low-income communities and communities of color.”
