What do you think of a national rent and mortgage freeze for three months or more? This was a question asked to Dallas S. Jones, political analyst and CEO of Elite Change Inc., over the weekend. Jones said it is necessary and that people won’t survive without a freeze.
The Coronavirus Aid, Relief, and Economic Security Act (CARES) will allow 180 days of relief for homeowners who are facing financial discomfort and extreme struggles. Homeowners and borrowers of federally backed mortgages can submit a forbearance request to their lenders.
A week ago, RA News reported on eviction and foreclosure extensions through the end of April. But many Texans are still worried about paying bills — especially those who live paycheck-to-paycheck and those who have been laid off.
The stimulus relief package includes a 120-day moratorium on evictions by landlords with mortgages that are backed by the United States Department of Housing and Urban Development (HUD), Fannie Mae and Freddie Mac, the Violence Against Women Act of 1994, or the rural housing voucher program, KHOU reported. KHOU interviewed Texas Department of Housing and Community Affairs spokesperson Kristina Tirloni, who said “people who have mortgages through these entities may also qualify for suspended or reduced payments during this time.”
The Texas Department of Housing and Community Affairs relief may be found for some through the emergency solutions grants, Tirloni explained, but a grant could take one to two months to arrive.
Some believe rent and mortgages should be halted all together for 90 days because some people can’t afford them at this time, Jones told Reform Austin in an email Monday.
“People are struggling financially due to the outbreak of COVID-19. Hours are being cut, people are being laid off, with unemployment checks making up a fraction of what you actually make, meaning people are less likely to pay rent.”
“The economic fallout is growing, with the nation experiencing an increased number of unemployment claims. The renter population are more vulnerable during this time because they are much less affluent with less savings in the bank,” wrote Jones. “With very little action taken, people simply cannot afford to make their monthly payments. Stimulus checks won’t arrive for a couple of weeks, leaving many people having to stretch their last check as much as possible.”
What would happen in a freeze? Margaret Kidd, University of Houston Supply Chain & Logistics Technology Program Director, explained the complexities in an email to Reform Austin.
“Ultimately, someone is left holding the bag. From a residential/commercial/industrial landlord perspective, their loans are not free and clear. When a tenant cannot pay the rent, then the landlord cannot pay the mortgage company. If the mortgage company does not receive the monthly mortgage payment, they cannot pay the employees servicing the loan or process the flow through to the lender/mortgage holder.”
These complexities are related to the 2008-2009 mortgage crisis, Kidd said.
“This escalation through the chain is less concerning on a very short term basis. However, if the scenario becomes longer term in nature, a very large bubble is created — similar to the 2008-2009 mortgage crisis. The difference is that during 2008-2009, there were a substantial number of high-risk loans that were packaged together in forms of collateralized mortgage investments.”
After that mortgage crisis, lending standards became more restrictive.
“At the end of the day who will be left holding the bag depends on the duration of the relief. It would be fair to say everyone will take a fair cut regardless,” she said.
Today one Austin based tweeter wrote, “Qué pasa si no pago el aquiler en Texas? (What happens if I don’t pay rent in Texas?),” with a retweet of an explainer from the Building And Strengthening Tenant Action (BASTA) organization about what happens if your rent isn’t paid.
Mark Roberts, Executive Director of the McCombs Real Estate Center at the University of Texas at Austin explained the CARES Act as it relates specifically to mortgage grace periods and rent relief.
“The overall CARES Act is seemingly intended to allow individuals to collect income from their company or through unemployment insurance and for many small businesses to acquire loans to cover their operating expenses (payroll, rent and utilities). With this as a backdrop, banks are providing guidance to their customers, both small businesses and households, if they can continue to make their loan payments, to continue to make those. However, if homeowners and small businesses need to help, to call them.”
Roberts said he expects layoffs to continue to some extent and that the act can help individuals and businesses.
“The provisions in the CARE Act, though, provide ample incentives for companies to retain their employees and likewise, for employees and businesses alike to meet their monthly obligations,” he said. “There is ample relief which can then help to underpin future economic growth.”
The Federal Housing Finance Agency said in a statement, “renters should not have to worry about being evicted, and property owners should not have to worry about losing their building due to the coronavirus.”
What would a forbearance do?
“Under a forbearance option, loan payments are postponed or reduced, but interest continues to accrue. If interest is not paid, then it may be added to the principal balance. So a lender may temporarily reduce or suspend mortgage payments. It is not loan forgiveness though,’ Roberts explained.
With rent payments due for April, this morning an employee of H-E-B went to Twitter to ask for help since her hours have been drastically cut.
Late fees for rent are also a concern, and one tweeter wrote, “More than half our city and hospitality industry has been affected by layoffs or business closures. The#rentfreeze doesn’t do anything if TAA properties are charging exorbitant amounts in late fees violating. Texas Property Code § 92.019. Late Payment of Rent; Fees.”
Relief cannot come quickly enough for some Texans like one who wrote today,“alright texas, you got two days to wave mortgages and rent.”
Dallas S. Jones of Elite Change Inc. noted that it’s not only renters who may suffer.
“In order to stop rent payments, mortgages have to be frozen as it will affect property owners — both corporate and individuals. If renters are struggling to afford the rent, owners will also struggle to meet their own mortgage responsibilities, putting their buildings at risk of foreclosure. ”
“Many local judges and elected officials have acted within their authority to halt evictions in their area. This relief will increase access money for Americans in a time where the economy is not discriminating based on income. We need to act now.”
Will a freeze be put in place within the next thirty days? Texans are asking.