Recent moves by Ginnie Mae and the Federal Housing Finance Agency to help mortgage servicers meet some of their short-term financial needs fail to defuse the ticking time bomb that could inflict lasting damage on millions of low- and middle-income families and blow a hole in an economic recovery from the COVID-19 crisis.
In a matter of months, the temporary reprieve from eviction for not paying rent provided by the CARES Act for federally assisted properties will end. Unpaid back rent will still be due. Those who received forbearance could end up seeing their payments effectively double for the remainder of their leases, “a crushing burden for most renters,” according to Laurie Goodman and Dan Magder of the Urban Institute. An increase in evictions seems inevitable.
And what about the apartment owners—many of whom are small businesses and nonprofit organizations? Fannie Mae and Freddie Mac, the country’s largest multifamily lenders, have offered owners a brief period to make up mortgage shortfalls. But how many owners will find tenants who will pay higher rents than before COVID-19? Owners’ only choices will be to deplete reserves, delay important health and safety maintenance, or default.
Homeowners, too, will be hard pressed to pay their forborne mortgage payments when they come due. Some will be able to work with their lenders to modify the terms of their loans, but many will find themselves in default. Moody’s chief economist Mark Zandi projects as many as 2 million resulting foreclosures.
