Federal officials announced a nationwide halt to foreclosures and evictions this week, protecting millions more than 30 million Americans from losing their home as the coronavirus outbreak ravages the U.S. economy.
But the federal plans don't cover more than 40 million renters, many of whom housing advocates worry may not be able to pay their rent next month.
As renters and homeowners grapple with mass layoffs and business closures, housing advocates, the mortgage industry and banks are growing increasingly concerned that the country will soon face a housing crisis that will rival the one that helped nearly take down the economy a decade ago.
This time, rather than mortgage delinquencies growing over time, it could spike suddenly as people suddenly find themselves without a job, said Jesse Van Tol, chief executive of the National Community Reinvestment Coalition.
Mortgage servicers have already begun to see an uptick in borrowers seeking help and could quickly become swamped, said Bob Broeksmit, president of the Mortgage Bankers Association.
"Servicers are laboring under the same constraints as everyone else, telecommuting and practicing social distancing," he said. "This is hitting at a time when their capacity is already constrained because of the pandemic."
The industry is asking lawmakers and the Federal Reserve to establish a liquidity facility for mortgage servicers to offset the costs of a lengthy downturn due to the crisis. If the pandemic lasts just six weeks and few borrowers need assistance, mortgage servicers should be able to shoulder the cost, Broeksmit said. But if the outbreak lingers and lots of borrowers ask for help, it could become unmanageable, he said.
Here's what you need to know about who is eligible for mortgage relief:
Q: What if I am facing foreclosure or eviction?
A: The U.S. Department of Housing and Urban Development and the Federal Housing Finance Agency, the regulator for Fannie Mae and Freddie Mac, have directed mortgage servicers to halt all new foreclosure actions and suspend those already in progress.
The HUD order applies to single-family homeowners who are unable to pay their Federal Housing Administration-backed mortgages. There are 8.1 million active FHA loans.
It also applies to loans backed by Fannie Mae and Freddie Mac, which covers about half of the country's mortgages or about 28 million borrowers. (The government seized control of Fannie Mae and Freddie Mac in 2008 as the housing market unraveled, and the firms' losses piled up. They remain in government conservatorship.)
The moratoriums will last until mid-May, but could be extended, according to regulators.
About 5 million homeowners with loans valued at $3.7 trillion are not covered by the HUD or FHFA plans, according to Inside Mortgage Finance.
The servicers of these mortgages don't have to comply with the federal plans but are expected to comply with the moratorium anyway. Bank of America said late Thursday that it has paused foreclosure sales, evictions and repossessions, but didn't say for how long.
Q: What if I was just laid off?
A: While it can take years for someone to lose their home to a foreclosure, many Americans may soon fall behind as companies shutter their doors to guard against the spread of the coronavirus and lay off workers.
The Federal Housing Finance Agency, the regulator for Fannie Mae and Freddie Mac, allowed the companies to establish a forbearance program allowing borrowers affected by the coronavirus to skip their mortgage payments for as long as a year. The Federal Housing Administration has a similar forbearance program.
Borrowers must apply for mortgage relief through their mortgage servicer. The servicer will decide whether the borrower qualifies for the assistance and how they would repay the missed payments. In many cases, the missed payments are tacked on to the end of a mortgage but servicers sometimes ask for a lump-sum payment.
"The government is essentially offering a year-long payment holiday so those who lose their jobs from COVID-19 can stay in their homes without worrying about mortgage payments or foreclosure," Jaret Seiberg, financial services analyst at Cowen Washington Research Group, said in a research note.
Most people in these forbearance programs won't have to make another mortgage payment until May 2021, Seiberg said.
But some people may have trouble reaching their servicer quickly. The Mortgage Bankers Association says the industry is grappling with same issues as the rest of the country, including employees working from home and practicing social distancing.
Borrowers shouldn't panic, said Broeksmit, president of the group. While mortgage payments are typically due the first of the month, borrowers are not likely to be considered late until the 15th, he said. "You have a little bit of time before you need to make arrangement with your servicer," he said.
A forbearance program can typically be approved within a few days, and unlike during the 2008 housing crisis, borrowers won't be required to submit tons of paperwork, Broeksmit said.
Q: What about renters?
A: Renters aren't directly covered by either of the government plans, though the Federal Housing Financial Agency, or FHFA, is offering mortgage relief to the owners of apartment buildings, who may struggle when their tenants can't afford to pay their rent.
Without a federal plan, renters face a patchwork of approaches. The Los Angeles City Council this week approved an emergency plan to temporarily halt evictions and create a citywide rental assistance fund. In Oregon, Home Forward, which provides affordable housing throughout the state, is offering renters affected by the coronavirus outbreak a rental break until May 31. The renters will be able to repay their skipped payments over 12 months, according to Home Forward. In Mountain View, California, the City Council has approved $500,000 renter assistance program for people affected by the coronavirus.
Stopping evictions is a critical step, but the country needs a long-term plan for its renters, said David Dworkin, president of the National Housing Conference, which is calling for a national rental assistance program.
Unlike homeowners, simply allowing a renter to skip a few payments that can be paid back later is not enough, Dworkin said. Homeowners can extend the length of their mortgage to make up for the missed payments while renters will be under pressure to make up their past due amounts all at once, he said. That would be unaffordable for many people, especially those in low-wage jobs, he said.
"The government must respond to this war against our way of life that is being fought against this virus. Rental assistance is a critical component of this," Dworkin said.
The Renters Alliance in Montgomery County, Maryland, is already being flooded with queries from nervous renters concerned that they won’t be able to pay their rent soon, said Matt Losak, executive director of the nonprofit advocacy group. About half of renters in the country are “rent burdened,” spending 30 percent of their income on rent, he said. “If you’re in that category and one of many workers who has a reduction of hours because of the crisis, you’re going to be pushed over the edge in your ability to pay rent,” he said.