On March 1, 2021, the Consumer Financial Protection Bureau (CFPB) issued a report entitled “Housing Insecurity and the COVID-19 Pandemic” (the report) which summarizes some relevant data and research on the impact of the pandemic on the mortgage market. The report warns of widespread foreclosures once protection from pandemics ends at the federal, state and local levels.
The report says: “[i]In 2020, those who were at least three months late on their mortgages rose 250 percent to over 2 million households and are now at levels not seen since the height of the Great Recession in 2010[s] severe economic hardship. “It further explains that”[t]The number of homeowners defaulting on their mortgages has doubled since the pandemic began – six percent of mortgages were in default 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 color communities. “As of December 2020, black and Hispanic households were more than twice as likely to report being in arrears on payments as white households, according to the report.[m]Federal Housing Administration (FHA) insured mortgage loans, “typically serving minority, low-income, and first-time borrowers,” have fared significantly worse than other types of credit. Your crime rate exceeds that of the last financial crisis. ” While “[f]Federal, state and local policymakers have taken important steps to help households cope with housing insecurity during the COVID-19 pandemic – from stimulus payments and increased unemployment benefits to forbearance and moratoriums on foreclosure and eviction . Many households will have difficulty dealing with significant arrears or permanent loss of income. “The report emphasizes that”[o]At particular risk are the 263,000 borrowers who lag behind residential real estate payments by more than 90 days but are not lenient. You will have limited options to avoid initiating foreclosure when the moratorium ends.
The potential impact of these statistics is serious. The report states that “[h]Uncertainty has been linked to higher rates of depression, higher rates of suspension and school exclusion, and an increased risk of chronic illness. ” Further, “[i]In the midst of a pandemic, housing insecurity can make it difficult for households to comply with public health measures such as quarantine or limiting their number of close contacts. “
It’s hard to know for sure how deep the residential uncertainty will be when the current pandemic protection expires. Some borrowers may not be included in the report because their plight is masked by temporary government support such as stimulus payments. Further government measures such as eviction moratoriums may be needed to stabilize the results.