March 27, 2020

Understanding Relief for Homeowners and Renters Impacted by Covid-19

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Covid-19

Last Updated: May 14, 2020

Federal government actions address housing instability amid the pandemic in three main ways:

  1. Homeowners in need may receive forbearance on their mortgage payments for six months, with an additional six months possible, for a total of one year of forbearance. Homeowners must have a loan backed by Fannie Mae or Freddie Mac, or a mortgage guaranteed or insured by the federal government
    • On May 13, the FHFA announced that starting July 1, 2020, the Freddie Mac and Fannie Mae are making available a payment deferral option for borrowers with forborne GSE-backed single-family mortgages. This deferral option allows borrowers, who are able to return to making their normal monthly mortgage payment when the GSEs’ moratoria expire, to repay their missed payments at the sale, or refinancing of the home or the end of the loan.
    • On April 21, the FHFA announced that it will require servicers who collect payments on GSE-backed single-family mortgage loans to advance only four months of missed payments on forborne loans.
    • On April 22, the FHFA announced that Freddie Mac and Fannie Mae will be authorized to purchase eligible, forborne loans for placement into their mortgage-backed securities.
    • On April 27, the Federal Housing Finance Agency (FHFA), borrowers with forborne Freddie Mac- and Fannie Mae-backed mortgages are not required to repay the missed payments in one lump sum. However, the FHFA-provided script for servicers states that borrowers won’t have to repay all missed mortgage payment at once, unless they are “able to do so.”
    • The Federal Housing Administration has released a Covid-19 Questions and Answers document, including guidance on repaying the suspended mortgage payments. 
  2. Home foreclosures, and related evictions, will cease for 60 days, as of March 18, on all federally backed mortgages
  3. Some renters have protections, too. Any tenant living in a federally assisted property or a property (of any size) with a federally backed mortgage may not be given notice of eviction or evicted for four months. Expanded emergency rental relief is needed to cover more tenants and minimize dislocation and stress towards the end of the moratorium. Tenants who are being evicted over the next four months should ask whether they live in a federally backed property. 
    • On March 23, the FHFA announced that Fannie Mae and Freddie Mac will offer multifamily property owners mortgage forbearance — in addition to the CARES Act’s 120-day forebearance; however, depending on when the borrower request forbearance from the GSE, the two forbearance periods could overlap — with the condition that they suspend all evictions for renters unable to pay rent due to the impact of Covid-19. 
    • On May 4, Freddie Mac and Fannie Mae released two separate property lookup tools to assist renters with finding out if they benefit from the Coronavirus Aid, Relief and Economic Security Act’s (CARES Act’s) temporary eviction moratoria for multifamily properties with GSE-backed mortgages. (See lookup tools for Fannie Mae and for Freddie Mac).

With over 30 million unemployment filings, the passage of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), and recent announcements by a range of Federal actors who touch the housing sector, the scope of need for relief for families who own or rent their homes and the extent of that relief is coming into focus. 

For homeowners, anyone with a federally backed mortgage, defined as one owned by Fannie Mae or Freddie Mac (collectively, the Government Sponsored Enterprises, or GSEs) or a mortgage guaranteed or insured by the Federal government, including Federal Housing Administration (FHA), Veterans’ Administration (VA), and US Department of Agriculture (USDA), is eligible for forbearance for a period of at least 180 days, with an additional 180 day extension available. Borrowers need to reach out to their mortgage servicers (the companies who process the mortgage payments) and inform them of their Covid-19–related hardship (which may be direct or indirect). Although no additional fees or charges may be added, at the end of the forbearance period, the accrued principal and interest payments would be owed.

Fannie Mae and Freddie Mac have both indicated that servicers have been directed to offer loan modifications after the forbearance period to provide further relief as they typically do following natural disasters. FHA has also encouraged servicers to consider a range of loss mitigation options to distressed borrowers. According to the most recent data from the Urban Institute’s Housing Finance Policy Center, nearly 30 percent of mortgage debt is unsecuritized, sitting on the balance sheets of “commercial banks, the GSEs, savings institutions and credit unions.” In some states, national banks and state-chartered banks have also extended forbearance for a period of time. The CARES Act also implements a foreclosure (and foreclosure-related eviction) moratorium for at least 60 days, dating back to March 18, on all federally backed mortgages. (Notably, foreclosures on vacant and abandoned properties can continue during this period, which will help prevent blight.)

For renters, as is so often the case, the picture is a bit murkier. Tenants in properties with federally backed mortgages as described above are protected against eviction notices and proceedings for 120 days. The eviction protection also extends to tenants receiving assistance under federal housing programs, including properties in the Low Income Housing Tax Credit program. Separately, should a tenant be in a building with a GSE-backed mortgage whose owner receives forbearance, the eviction moratorium would be in place for the duration of the forbearance period. (Note, however, that the current forbearance period being offered by the GSEs runs 90 days, so depending when the forbearance goes into effect, it may or may not extend beyond the 120 days in the statute. Moreover, although the statutory eviction moratorium contains no exceptions, the GSE policy limits the moratorium to Covid-19–related nonpayment; evictions for other reasons like prior non-payment or violations of lease terms could resume.) 

The protection applies to people living in multifamily properties as well as any single family homes or 2-4 unit properties that are financed through federally backed single-family mortgage channels. In the past, policymakers have neglected to offer relief to renters in 1-4 unit properties, treating that segment of the housing stock as owner occupied. Extension of eviction protections to residents touched by the single family mortgage market is critical, as 1-4 unit properties account for 51 percent of all occupied rental properties in the United States.i  

While on its surface, the coverage for renters appears relatively comprehensive, the share of federally backed mortgages is much smaller than in the homeownership space. Of the outstanding multifamily mortgage debt, the GSEs and Ginnie Mae (which securitizes mortgages issued by federal agencies) combined for slightly less than half the market as of 2019Q3. The rest of the multifamily mortgage debt is mostly held by banks on their balance sheets, along with commercial lenders, state/local credit agencies, and life insurance companies. Because tenants do not generally know who their landlord’s lender is, they may not realize they are protected against eviction. In practice, most courts have shut down, so legal proceedings cannot move forward; however, where threat of eviction rather than  a formal filing is used by a landlord to get a resident to vacate a unit, a tenant may not be aware of his or her rights. Moreover, most courts are still accepting new filings despite the absence of court proceedings, which could mean a backlog of cases when the courts re-open.

In addition, the legislation does not cover renters in properties without any mortgage debt at all. While more than three-quarters of all medium-sized multifamily (25-49 units) and large multifamily (50+ units) buildings have a mortgage, only about 60 percent of smaller multifamily (5-24 unit) property owners report any mortgage debt. About 65% of 2-4 unit properties carry a mortgage, and among single family rentals, only 44 percent are mortgaged.  

Our research has shown that smaller multifamily properties tend to have lower rents and serve as a critical source of unsubsidized affordable housing serving lower income families. The lack of indebtedness on many of these properties means that landlords may have more flexibility to work with their residents to stretch out, reduce, or even forgive rent payments as paychecks shrink or disappear. On the other hand, in cases where landlords can’t or won’t work with their tenants’ sudden inability to pay rent as a result of widespread shutdowns, the pending legislation offers no protections. A number of states and localities have imposed blanket eviction moratoria, which would temporarily protect these tenants irrespective of the landlord’s mortgage status or source of their homes. 

To more completely address the needs of renters and their landlords, expanded emergency rental relief is needed, as we know the problem of missed rents on April 1 will likely reappear in May, June, July, and even beyond. Flowing through states and localities, the relief funds would pass to landlords with the proviso that tenants would be credited for the payments. In this way, landlords would continue to have necessary cash flow to operate their properties while residents would not face an insurmountable obligation coming due as eviction moratoria expire. In many ways, a program such as this would functionally the mirror the relief being extended to homeowners in the form of mortgage modifications tailored by their circumstances and capacity to pay.


Enterprise Community Partners calculation of 2018 1-Year American Community Survey microdata, as provided by IPUMS USA, University of Minnesota, www.ipums.org.
ii Enterprise Community Partners analysis of custom tables generated from the 2015 Rental Housing Finance Survey.
 

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