Goodwin

On March 1, 2021, the Consumer Financial Protection Bureau (CFPB) issued a report titled “Housing Insecurity and the COVID-19 Pandemic” (the Report), which summarizes some of the relevant data and research on the impact of the pandemic on the mortgage market.  The Report warns of widespread foreclosures once federal, state, and local pandemic protections come to an end.

The Report states that “[i]n 2020, those who have fallen behind at least three months on their mortgage increased 250 percent to over 2 million households, and is now at a level not seen since the height of the Great Recession in 2010,” which “signal[s] severe economic distress.”  It further explains that “[t]he number of homeowners behind on their mortgage has doubled since the beginning of the pandemic—six percent of mortgages were delinquent as of December 2020, up from three percent in March 2020.”  As a result, “a significant number of households [are] at risk of losing their housing,” and “a disproportionate number of them [are] from communities of color.”  Indeed, according to the Report, “Black and Hispanic households were more than twice as likely to report being behind on their payments than white households” as of December 2020.  Consistent with this, “[m]ortgage loans insured by the Federal Housing Administration (FHA loans),” which “typically serve minorities, low-income borrowers, and first-time borrowers,” “have fared significantly worse than other loan types; their delinquency levels exceed those that were seen in the last financial crisis.”  While “[f]ederal, state, and local policymakers have taken significant steps to help households navigate housing insecurity during the COVID-19 pandemic—from stimulus payments and enhanced unemployment assistance, to forbearance and moratoria on foreclosure and eviction,” once “these measures begin to expire, many households will face difficulties navigating significant payment arrearages or permanent income losses.”  The Report emphasizes that “[o]f particular risk are the 263,000 borrowers that are more than 90 days behind on housing payments but have not taken forbearance,” who “will have limited options to avoid foreclosure initiation when the moratoria end.”

The potential impacts of these statistics are grave.  The Report explains that “[h]ousing insecurity has been associated with higher rates of depression, higher rates of suspension and expulsion from school, and increased risks of chronic health conditions.”  Further, “[i]n the midst of a pandemic, housing insecurity can make it difficult for households to comply with public health measures such as quarantining or restricting their number of close contacts.”

It is difficult to know for certain how deep housing insecurity will run when current pandemic-related protections expire.  Some borrowers may not be counted in the data reflected in the Report because their distress is masked by temporary government assistance such as stimulus payments.  Continued government actions, such as eviction moratoria, may be required to stabilize outcomes.

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