WASHINGTON—Approximately one-million homeowners have fallen through a safety net created by Congress early in the coronavirus pandemic to protect borrowers from losing their homes, according to a new analysis. The result: those homeowners are vulnerable to foreclosure and eviction.
As CUToday.info has reported, homeowners with federally guaranteed mortgages have been granted forbearance and can skip monthly payments for as long as a year without penalty, with the ability to then make the payments up later. Proof of hardship is not required under the rules created for homeowners with mortgages backed by Fannie Mae and Freddie Mac.
But many homeowners eligible for the relief have not applied.
“Some borrowers are falling through the cracks that we’re not picking up,” Lisa Rice, president and chief executive of the National Fair Housing Alliance, told the Wall Street Journal. “It’s just a really sad series of events.”
About 1.06 million borrowers are past due by at least 30 days on their mortgages and not in a forbearance program, according to mortgage-data firm Black Knight and cited by the Wall Street Journal. Of those, some 680,000 have federally guaranteed mortgages and qualify for a forbearance plan under the laws enacted by Congress. The rest have loans that aren’t federally guaranteed, and their lenders aren’t required to offer forbearance, though many have chosen to do so, the Journal reported.
“Housing counselors say many borrowers don’t know that forbearance is an option. Others are afraid of reaching out to their lenders, and still others have trouble navigating the complex bureaucracy of mortgage finance,” according to the Journal’s report.
Little Help From Servicers
Sue Stevenson, a mortgage-default counselor near Seattle, told the Journal some lenders and servicing companies make little effort to help borrowers.
“We might refer to it as the document paper game,” she was quoted as saying. “The servicer has everything that they require to do a loan modification to review but continuously and sometimes for over seven months will keep asking for documents that they already have. It is frustrating to no end.”
Lenders and consumer groups told the Wall Street Journal the number of past-due mortgages that aren’t in forbearance could grow as several million people who are in forbearance reach the six-month point of their plans by the end of October. An extension of as long as six months is possible, but homeowners must ask for it. Lenders further told the Journal they are reaching out to these borrowers before their forbearance periods expire.