Not Just Renters: Mortgage Foreclosure Protections Expiring Too, Endangering 1.75 Million Homeowners
21:18 GMT 03.08.2021 (Updated: 22:51 GMT 03.08.2021)
© AP Photo / Paul SakumaForeclosure sign shown through a front gate of a foreclosed home in Oakland, California
© AP Photo / Paul Sakuma
US COVID-19 cases are once again spiking, reaching levels not seen since the winter, but so far neither state nor federal government officials are considering social lockdowns like those used before mass vaccination began. Instead, they are emphasizing mask-wearing and getting the vaccine, which can mitigate severe cases.
The federal ban on evictions of renters wasn’t the only pandemic-related protection allowed to expire on July 31: a federal ban on foreclosures also ended, and while several ad hoc programs will mitigate the effect for a few months, nearly 2 million Americans remain behind on their house payments.
Just days after a global pandemic was declared in March 2020, the Trump administration began offering homeowners the option of forbearance on their federally-backed mortgage payments, allowing them to reduce or defer those payments without penalty as a way to weather the financial hardships created by covid-related shutdowns and job losses.
The program affected homes with mortgage backed by the Federal Housing Administration (FHA), Department of Veterans Affairs (VA), Department of Agriculture (USDA), and state corporations Fannie Mae and Freddie Mac under the Federal Housing Finance Agency (FHFA), and at its height protected more than 11 million families.
However, the Biden administration said in June that its month-long refresh of the program would be its last, and as August begins, at least 1.75 million homeowners remain in forbearance, or 3.5% of all homes in the US, according to the Mortgage Bankers Association. The Consumer Finance Protection Bureau (CFPB) has created three new safeguards that will help mitigate or delay foreclosures for a time, but they are confined to borrowers who fell behind during the pandemic and ultimately won’t halt foreclosure altogether.
Those measures, which protect borrowers more than 120 days behind on their payments, include a loss mitigation program that can delay foreclosure; requiring loan servicers to verify that a property is considered abandoned under local and state laws before proceeding with a foreclosure; and requiring loan servicers to make a “reasonable” effort to contact borrowers and to wait 90 days after doing so before beginning the foreclosure process.
However, those protections don’t go into effect until August 31, meaning some could still be kicked out of their homes in the month-long gap.
About 1.5 million of the 1.75 million in forbearance are at least 90 days behind - a number roughly equivalent to that reported in March 2021 - and at least 20% of them won’t be able to forestall foreclosure past September, according to the Washington Post.
“This is just more of the K-shaped recovery,” Diane Thompson, senior adviser to acting CFPB director Dave Uejio, told the Post. “The ones who are left [in forbearance] are by and large people who aren’t paying, can’t pay and haven’t made payments for a very long time.”
The American Rescue Plan Act (ARPA) signed into law in April 2021 provided $10 billion in a Homeowners Assistance Fund to help homeowners pay off that debt, but “the program is moving so slowly that protections are expiring before states have figured out how to distribute the money,” the Post reported. According to the paper, by Saturday, the US Treasury hadn’t even opened its portal for states to submit their distribution plans, meaning they can only access some 10% of what’s been set aside.
Budding Movement Demands Return of Eviction Ban
A similar situation has plagued the Emergency Rental Assistance Program, created by the CARES Act in December 2020 to distribute $25 billion in bailouts to renters behind on their payments. Between the December allotment and a subsequent $21.5 billion created for state and local programs in early 2021, some $46 billion was set aside to save more than 15 million American renters from eviction.
However, as Sputnik has reported, the federal eviction moratorium mandated by the US Centers for Disease Control and Prevention (CDC) was also allowed to expire at the end of July without being replaced by a more concrete action, such as a federal law or executive order, and just a tiny fraction of the aid money - $3 billion in federal funds and $1.5 billion in state and local funds - has actually been paid out to struggling renters.
Unlike homeowners, renters never got an equivalent pause on their rent payments, which have piled up into substantial debts over the past 18 months.
© REUTERS / ELIZABETH FRANTZPeople camp out on the steps of the U.S. Capitol to highlight the upcoming expiration of the pandemic-related federal moratorium on residential evictions, in Washington, U.S., July 31, 2021.
People camp out on the steps of the U.S. Capitol to highlight the upcoming expiration of the pandemic-related federal moratorium on residential evictions, in Washington, U.S., July 31, 2021.
The result is that millions of Americans behind on rent payments face the immediate or impending threat of being rendered homeless, as some state eviction bans are also set to expire in the coming weeks.
With House lawmakers beginning a seven-week summer recess on Friday without replacing the eviction ban and the Senate set to join them later this week, activists have rallied to the call by Rep. Cori Bush (D-MO), a progressive freshman representative, to occupy the steps of the US Capitol building until a new protection is enacted.
On Tuesday afternoon, the CDC suddenly reversed course and issued a new "targeted" moratorium lasting until October 3, noting the order is confined to target areas with significant community spread of COVID-19, which heightens the risks associated with eviction and homelessness.
Unemployment, Student Loan Help Ending
Other pandemic protections are also being allowed to sunset, as well. Many US states have already voluntarily ended their federal unemployment benefit programs even as millions remain without jobs and new unemployment applications are once again rising. The federal program created by the ARPA was given sufficient funding to operate until September 6, but more than half of state governments had already cut theirs by early July, driven by conservative beliefs that the payments have been keeping Americans from more adamantly seeking out employment.
Student loan deferment, also introduced at the start of the pandemic by the US Department of Education, allowed millions of Americans to preserve their meager incomes during lockdown periods by putting off payment of loans used to pay for their college education. The program is set to expire on September 30, 2021, but Biden hasn’t yet spoken on the issue. Americans hold roughly $1.7 trillion student loan debt.
Several lawmakers have pushed the Biden administration to extend it until March 2022, and to forgive up to $50,000 per person in student loan debt. Senate Majority Leader Chuck Schumer (D-NY), Sen. Elizabeth Warren (D-MA) and Rep. Ayanna Pressley (D-MA) appealed to Biden last week to make the move via executive action, urging that “failure to act would be unconscionable, would undermine our economic recovery.”