A staggering 8 million households face foreclosure or eviction.
Here’s what you need to know.
Mortgages: foreclosure and eviction
The Covid-19 pandemic has wreaked havoc on all walks of life — and housing is no exception. New research from Harvard University shows that:
- 2 million homeowners are behind on their mortgages; and
- 6 million renters are behind on their rent payments.
Here’s another problem: the federal moratorium that prevents foreclosures for owners and evictions for tenants is set to expire on June 30, 2021. Absent any extension, this means that millions of Americans could be homeless within one week.
Covid-19 pandemic: housing didn’t boom for everyone
While the Covid-19 pandemic caused an increase in home prices in some parts of the country, not everyone’s financial fortunes flourished. Some households who survived the Covid-19 pandemic and didn’t experience financial distress purchased new homes. Limited supply plus rapid home purchases caused home prices to soar. Other households who lost income or suffered financial distress during the Covid-19 pandemic fell behind on mortgage and rent payments. Many of these renters have low income and people of color, according to the Harvard researchers. While the federal government has provided billions of dollars in financial support, the researchers say more financial stimulus is necessary. According to the report: “about a quarter of the renters with COVID-related job losses reported that they had substantially depleted their savings, another quarter had borrowed from families and friends, and a tenth had turned to payday or personal loans. Even assuming they regain their financial footing, these households will have fewer resources to draw on whether for everyday needs, emergencies, or for a downpayment on a home.”
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Will the moratorium on foreclosures and evictions get extended?
There has been no shortage of advocates who have called for the Biden administration to extend the federal moratorium beyond June 30. However, there is no present indication that the federal moratorium will be extended. The federal moratorium was included in the Cares Act, the $2.2 trillion stimulus package that Congress passed last March. President Joe Biden then extended the federal moratorium. That said, there may be certain protections and financial relief available at the state level. Homeowners and renters can check with their state’s housing authority for any available options. The Consumer Financial Protection Bureau (CFPB) has proposed that lenders postpone foreclosure proceedings until 2022. Absent an extension of the federal moratorium, or any state or local moratorium, for example, a lender or landlord conceivably could start the process for a foreclosure or eviction beginning July 1, 2021.
Rent and mortgage cancellation during Covid-19
You’ve heard of student loan cancellation. For example, Biden has now cancelled $3 billion of student loans. Now, some members of Congress not only have proposed to extend the federal moratorium, but have taken further steps to protect homeowners and renters. Have you heard about cancelling mortgages and rent? For example, last April, Rep. Ilhan Omar (D-MN) introduced legislation — The Rent and Mortgage Cancellation Act — which would institute a nationwide cancellation of residential rents and mortgage payments until the end of the Covid-19 pandemic. In contrast to a moratorium, Omar’s legislation would outright cancel rent and mortgage payments during the Covid-19 pandemic.
The Rent and Mortgage Cancellation Act, if Congress passes the proposed legislation, would include the following:
- full payment forgiveness of rent for your primary residence;
- full payment forgiveness of mortgage payments for your primary residence’
- no accumulation of debt for renters;
- no accumulation of mortgage debt for borrowers; and
- no negative impact on credit rating or rental history for mortgage borrowers or renters
Despite the bold attempts to help homeowners and renters alike, there is no plan for Congress to pass this proposed legislation. That said, the researchers note that the federal government can take multiple steps to provide financial relief. Among other proposals, the researchers note that the Biden administration has proposed an expansion of housing vouchers and affordable housing programs. The researchers say that increasing access to homeownership is an important step to reduce disparities that have been exacerbated by the Covid-19 pandemic. Specifically, they say federal support for downpayment assistance to purchase a home can help alleviate access to quality financing. Finally, the researchers propose the policymakers reduce bureaucracy and land use regulations so that homebuilders can build affordable housing in a wide range of geographies.
Disclosure: Zack Friedman is a graduate of Harvard University.