Cam Melchiorre: Rapid Rental Relief: The Problem and The Solution
Camillo Melchiorre is president and director of regulatory compliance with Indisoft LLC, Columbia, Md. IndiSoft develops, licenses and supports a wide range of Web-based software solutions for the financial services industry, including RxOffice Legal, RxOffice Borrower Portal and RxOffice Reporting Portal.
Renter households have been especially vulnerable to the economic disruption caused by COVID-19. While Congress has approved funds to help the millions of people affected, state housing finance agencies and community-based housing authorities must process, underwrite and render decisions on applications for this urgent financial aid within certain timeframes and also with proper governance and oversight to withstand program audits. It is imperative for technology providers to help navigate the way through the process that could, if not addressed, destabilize the housing industry.
On Jan. 3, Congress passed the American Rescue Plan Act to fund vaccinations, provide immediate direct relief to families bearing the brunt of the COVID-19 crisis and support struggling families as well. Congress allocated $2.55 billion of that relief to go to state grantees to be distributed to eligible tenants facing eviction and other challenges related to housing costs.
According to the Census Bureau’s Household Pulse Survey, 49 percent of renter households reported at least some lost employment income between mid-March and mid-September. Income losses have been widespread, affecting some 59 percent of Hispanic renters, 53 percent of Black renters, and 45 percent of white renters.
These troubling statistics along with the impending release of eviction moratoria nationwide only serve to increase the urgency needed to get relief to eligible tenants and landlords.
Application Processing Nightmare
Most state and community-centric government agencies do not have access to modern, sophisticated and user-friendly web applications that will expedite processing for millions of distressed tenants, homeowners and landlords. Because of rigid timelines for disbursement, oversight requirements and reporting, rapidly deployable systems are needed for effective data and document collection as well as secure and transparent communications.
IndiSoft reviewed 25 grantees processes and found that they are essentially manual, paper-based with a nominal web interface that supports downloading of forms at best.
Many program risks exist, not the least of which is the failure to approve eligible applicants within the sunset provisions, and that requires reallocation of dedicated funds. Capacity limitations, information privacy and data security, inconsistency of treatment, quality control and audit functions, continuity of communication with stakeholders, fraud detection, governance and reporting to oversight agencies are very serious threats to program success.
Most worrisome is reputational risk resulting from program failure. Recently, Pennsylvania suffered the consequence of being unable to process applications for rental assistance: the state was forced to allocate $108 million to other projects while thousands of tenants and landlords never received the federal aid specifically targeted for them.
The Solution
A centralized, cloud-based, collaborative technology platform with rules-based stakeholder specific functionality is the answer. Such a system may be rapidly deployed and easily connected to existing accounting and disbursement systems on the back end of the process.
There are examples of this type of processing solution that were deployed during the Great Recession to bring federal and state relief funds to distressed homeowners facing foreclosure. Three of the most effective homeownership relief programs were The Emergency Home Loan Program (EHLP), the Hardest Hit Funds initiative (HHF) and the landmark National Mortgage Settlement, which was the consent order between the top-five banks in the country, the U.S. Department of Justice and 49 Attorney Generals, led by the former California Attorney General Kamala Harris.
The system offers the efficiency necessary to expedite the application process through several features including an online, dynamic application process that quickly pre-qualifies tenants that eases the participation of landlords and the integration of HUD-certified housing counselors for live chat and call-center assistance as critical and safe resource to increase the speed and accuracy of application submission.
The system also offers governance, oversight, reporting and accountability with built-in program reporting to HUD, Treasury, state agencies and internal audit as well as real time assessment review and performance.
Time is of The Essence
Since March 2020, there have been three federal stimulus bills enacted to bring financial relief from the pandemic. Unfortunately, getting the urgently needed funds to eligible citizens is still problematic despite the existence of a modern crisis-management technology solutions developed especially for these situations. In this case, time is of the essence because funds are limited and have an expiration date. This makes it even more imperative for consumers who need the assistance to apply before the funds are reallocated.
Servicers that have rental property loans in their portfolio can help educate mortgagor/landlords about the availability of relief funds by directing them to county housing authorities who are charged with distributing these funds. This will help prevent and/or resolve delinquencies.
(Views expressed in this article do not necessarily reflect policy of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA NewsLink welcomes your submissions. Inquiries can be sent to Mike Sorohan, editor, at msorohan@mba.org; or Michael Tucker, editorial manager, at mtucker@mba.org.)
