As the pandemic drags on, time is running out for many homeowners. People with loans in forbearance have to resume payments this year, likely as soon as the end of March.
It leaves many borrowers with difficult choices — either find the money to pay their mortgage, refinance if possible, convince their lender to ease the terms of their loan, or default.
When decision time comes at the end of the current foreclosure moratoriums, millions of people could lose their homes.
Twelve percent of Connecticut households with mortgage loans have reported they weren’t caught up on their payments. Many are in forbearance, but even more are past due and delinquent.
In the state, 7.1 percent of mortgages are delinquent, according to Black Knight, a firm that provides lenders and mortgage servicers with data and analytics. Delinquencies peaked in May at 9.6 percent, the highest level since the Great Recession.
Among those homeowners who are behind, nearly 20 percent think they might face foreclosure in the next two months, according to the Census Bureau’s Household Pulse Survey.
“A foreclosure tsunami is beyond the loss of wealth and homeownership,” said Erin Boggs said, executive director of Open Communities Alliance. “It’s a really intractable problem for the economy in which people are ready and willing to work but won’t have a stable place to live. It’s really untenable and this one is really on the government to step up and show us what good government looks like.”
For homeowners who can’t afford to keep up with mortgage payments because of income loss, the Federal Housing Administration established relief options for those federal mortgages, which make up about 70 percent of Connecticut’s home loans.
As one of his first actions in office, President Joe Biden extended the federal eviction and foreclosure moratorium until the end of March. It protects homeowners with federal insured mortgages from facing foreclosure proceedings and tenants from facing foreclosure-related eviction.
Since the moratorium was first put into place, foreclosures ground to a halt. Last April, 66 new foreclosures started, compared to 10,445 started in February last year, according to the U.S. Department of Housing and Urban Development.
The reason for delinquencies in FHA loans can almost entirely be tied to the national emergency — as of January it was the given reason for 83 percent of new serious delinquencies, according to HUD.
As of December, more than 10 percent of the 8 million single-family mortgages backed by the FHA were delinquent by more than three months — the measure of serious delinquencies.
The foreclosure moratoriums and forbearance options don’t apply to loans with private banks — assistance is determined by each lender. To help those homeowners, Connecticut had established a homeowner assistance program but ended the intake in early December.
The Connecticut Housing Finance Authority is still making available the Emergency Mortgage Assistance Program for people who fell behind on their mortgage payments due to a temporary financial hardship beyond their control. But the agency can’t help everyone.
“The scale of this crisis far exceeds what EMAP is able to do, so there’s a question of what other assistance can come through,” CFHA CEO Nandini Natarajan said.
More than 5 percent of mortgages nationally are in forbearance, down from a peak of 8.6 percent in early June, according to the Mortgage Bankers Association.
“The level of forbearance we’re seeing in the industry today, is unheard of. It’s never been done before...so what’s going to happen at the end of it is a big question,” Natarajan said.
Though forbearance and delinquencies have improved since mid-2020, when forbearance plans begin to expire in March, there would still be approximately 1.5 million more serious delinquencies than at the start of the pandemic, according to Black Knight.
Despite these uncertainties, home prices and sales have increased during the pandemic, particularly in Fairfield County which saw an influx of New York residents fleeing to Connecticut last year.
Sales of single-family homes were up by nearly two-thirds from a year ago.
Demand has also pushed the cost of listings up. The price of the median home sold in Fairfield County was up 24 percent from the equivalent home sold in November 2019, according to William Pitt Sotheby’s Realty.
Housing and homeownership is considered a large component of wealth and while the ability to buy a home is a reflection of wealth already acquired, homeownership is also an important channel for upward mobility and building generational wealth.
This means the homeowner crisis brought on by the coronavirus pandemic could signal a serious impact on families of color and first-time home buyers in particular.
White Connecticut residents more often own their homes than rent, while the inverse is true for Black residents — homeownership among Black families is at 40 percent, while for white families it’s at 76 percent.
In concert, the typical white family in the U.S. has eight times the wealth of the typical Black family and five times the wealth of the typical Hispanic family, according to the Survey of Consumer Finances.
“The wealth gap in this country can be attributed directly to homeownership,” said Boggs, of the Open Communities Alliance.
Amid this crisis, Boggs expects to see Black and Hispanic homeowners once again bearing a disproportionate struggle.
“Just like the burst in housing bubble not so long ago, Black and Latino families, who on average have lower incomes and less wealth, are being hit harder by this crisis and having additional cushions of wealth or added income are the kind of resources you need to get through tough economic times,” Boggs said.
Just 10 percent of Hispanic families and 14 percent of Black families have enough savings to cover six months of expenses, compared to 36 percent of white families and 27 percent of other families, according to the Survey of Consumer Finances.
mdignan@hearstmediact.com
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CT homeowners struggling to pay mortgage are running out of time - CTPost
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