As the federal government rushes to connect a new safety net to struggling homeowners, housing advocates fear bailout may be too late for some severely affected. most by the pandemic.
Countries face a deadline of this Sunday, April 25, to request a portion of the nearly $ 10 billion Homeowners Fund to be created as part of the COVID-19 bailout package. Latest. Those funds can be used to help homeowners pay for mortgages, insurance, utilities and more. However, program participants must submit their cash distribution plans to the Treasury Department for approval and even the fastest moving states have a hard time starting distributing large sums before the end of the summer. , policy experts said.
Meanwhile, the Department of Consumer Finance Protection again seeks to add new protections for mortgage borrowers adopt a controversial proposal that includes suspending foreclosure initiatives until 2022. Those changes, if completed, are unlikely to come into effect before the end of August.
While these relief efforts are under construction, many homeowners need immediate help. “The problem is right now,” said Alys Cohen, staff attorney at the National Consumer Law Center. “If we don’t act quickly, we will soon face unnecessary foreclosures in large numbers.”
Homeowners in immediate danger include many of those with a privately owned and unsupported mortgage, accounting for about 30% of all mortgages of an individual. Family and So far have been excluded from national pandemic reliefas well as those who do not have a mortgage but face foreclosure for not paying property taxes – a growing problem in many states, housing advocates say. Many federally backed borrowers are also running out of time as the foreclosure ban on their loans expires at the end of June.
More than a year after the public health emergency began, millions of homeowners are still feeling uneasy. According to mortgage data provider Black Knight. As of the end of March, nearly 2.6 million borrowers are still in plan to ban their payment suspension. Such programs have prevented many foreclosures during the pandemic, but foreclosures in the first quarter of this year rose 9% from the previous quarter, according to Attom Data Solutions. Rick Sharga, executive vice president at RealtyTrac, an Attom unit, said some of those increases could be due to foreclosure on vacant and abandoned properties.
“The easy part is giving people tolerance,” said Julia Gordon, president of the National Community Stabilization Trust, a non-profit that works to protect neighborhoods from discoloration. “The trick is getting them out of the box in a way that keeps them at home for a fair payout.”
Brenda Myers, 52, a landlord in Abbottstown, Pa., Knows all too well. She fears she will lose the house 28 years after her current ban expires in June. In the months leading up to the pandemic, she lost her job, her husband passed away after a stint in an expensive nursing home, and she started to fall behind in mortgage payments right after the crisis. COVID begins.
She says her ability to work is limited due to being injured in a car crash. She says that she does not have the money to carry the current loan, and has no income, she is having difficulty amending the loan.
“It’s very difficult and I’m still trying to handle the funeral,” she said. “Ring is fine, but it doesn’t help homeowners bring back their current mortgage.” “You will see a lot of homes foreclosure,” she said.
The fate of many homeowners like Myers – and potential future allocations to the Homeowners Fund – will depend on how quickly and efficiently states can distribute their HAF dollars, policy experts said. Initially, the treasury will grant each approved participating state or tribe 10% of its total HAF allocation and will release additional funds when they approve the participant’s money distribution plan.
Stockton Williams, executive director of the National Council for State Housing Authority, said it would take several months for the state’s programs to get up and running. Russell Graves, executive director of the National Fund for Debt Management, a nonprofit housing consultancy, says the slower states are likely to stay out of business until 2022.
Nations looking to strengthen their wealth need to learn from past mistakes and – to the extent possible – stick to a standardized textbook, policy experts say. Housing advocates say a key precedent for HAF, the Hardest Funds program set up by the Treasury in 2010 to cope with the recent financial crisis, has a strong track record. tell. Some states have been slow to distribute money, advocates say; creates additional barriers for homeowners not mandated by the federal government; and have difficulty getting cooperation from mortgage service providers.
Countries have some time to adapt to Homeowners Fund programs, which worries some policy experts. David Dworkin, Executive Director of National Housing Conference, said: the widespread shift among state programs “could be counterproductive in quick withdrawals” and aroused concerns about fundraising. will be targeted to those who need it most. And while the HAF law does not mandate excess eligibility or documentation requirements, “the question is whether states will take defeat from the function of victory” by design. on more demanding programs, says Joseph Sant, general counsel and vice president of the Center for the New York City neighborhood.
Meg Burns, executive vice president of the Housing Policy Council, a commercial group for mortgage initiators and providers, said. The Treasury said it would provide a template that participants could use to design their programs.
Even when the money goes away quickly and smoothly, some supporters argue that many homeowners may be left out by the cold. “Obviously, $ 10 billion is not enough,” said Dworkin, to help all those in need, although it could provide the basis for Congress to continue its allocation.
Many supporters are also looking for the HAF program to support borrowers whose mortgages not backed by Fannie Mae have federal regulations.
or Freddie Mac
or by the federal government. But in mid-April instructionsThe Treasury Department calls on states to give priority to certain federal borrowers, including those with mortgage loans by the Federal Housing Administration, the Department of Veterans Affairs, and the US Department of Agriculture.
While that guidance is in line with the program’s goal of reaching lower-income borrowers and not excluding non-federally backed borrowers from the program, experts say, it appears to be have neglected many private mortgage borrowers, who had lower incomes and in some cases did not receive pandemic-related bailout. “The people in private mortgages don’t have any congressional protections right now, and in some cases they have been subjected to harsh terms during the pandemic, for example. as is required to be reimbursed once when the restraining order expires – a practice that is not permitted on people with a federally backed mortgage. “I was surprised not to focus more on paying off private loans,” she said. “That’s where some of the worst operations are going on.”
The Treasury Department did not respond to a request for comment.
Non-federally backed borrowers will be CFPB’s proposal to stop initiating foreclosure until 2022, with exceptions likely to occur when service providers have taken care of them. Certain steps to evaluate other options or make reasonable efforts to contact unresponsive borrowers. But that proposition is on fire from all sides as well.
In the mortgage industry, one concern is that the proposal could force service providers to breach their contractual arrangements with mortgage investors. David Stevens, CEO of Mountain Lake Consulting, former head of the Mortgage Banking Association and said: “The industry can handle it, but I hope this is not a sign of office. how will you behave, because it’s very annoying. a former FHA commissioner.
Others see a legal battle in progress. “You have contract law between the service providers and the note holder,” says Sharga. If the rule was continued, he said, “I will have to assume someone will challenge it in court.”
“As a general matter,” according to a CFPB spokesperson, the office does not believe its regulation will require mortgage providers to breach contracts with investors, but they want to take a look at them. comments on this issue.
Meanwhile, homeowners advocates say the CFPB has the authority to stop foreclosure activities until the end of the year – that’s not the best idea for many borrowers. For example, some borrowers could be at immediate risk if they get past the box by 2022, “and this proposition gives them little,” Cohen said.
The rule-making process will also take months to complete, but “many people, especially with private loans, are now out of bans or unacceptable and in need of help right now. , ”Said Cohen. These borrowers “need the office to set a standard that all mortgage lenders must offer sustainable options to homeowners.”
CFPB is concerned that some borrowers, including those whose loans are included in private label securities, fall through cracks while the rule is finalized and they are using the tools. Another to help solve the problem, says Diane Thompson, the office’s senior advisor. For example, in early April, The mortgage office warning people Be prepared for an increase borrowers need help and said they will closely monitor responses to borrowers’ requests.
Cohen also questioned aspects of the proposal that received less attention, including requiring a server to orally disclose the prohibition options available when speaking to troubled borrowers regarding COVIDs. who have not yet participated in such programs. “Many reports point to confusion and misinformation” when borrowers talk to waiters, she said. “The failure to provide anything in writing is a significant weakness in the proposal.”
“Just because you put it in text doesn’t mean it’s clear and someone reads it,” says Thompson. “In the end what we want and most homeowners want, is to have a more nuanced conversation” helps the borrower understand their options.