End of Mortgage Moratorium May Bring Flood of Foreclosures

James R. Hood
James R. Hood

The end of the eviction moratorium for renters has already raised fears that millions of consumers may become homeless. Now similar fears surround the end of the mortgage forbearance program that has provided a little breathing space for some homeowners during the COVID-19 pandemic.

Homeowners who have federally-insured mortgages have been eligible for delayed payment plans in some cases but that program is ending and about 3 million homeowners may be affected.

If you’re behind on your mortgage payments, here are some tips
Good news: You may still be able to request a forbearance because of COVID-19

“The forbearance program is obviously designed to deal with the characteristics of this pandemic. This isn’t related to mortgage underwriting or a downturn in the economy — it’s a sudden disruption that’s believed to be temporary in which people can resume their normal life,” said Ed DeMarco, president of the Housing Policy Council (HPC). “Forbearance is a normal tool in the toolkit, it’s been used with some regularity with natural disasters, or any temporary emergency which disrupts normal living and income.”

Like all federal programs, this one is complicated and can be difficult to navigate. The Department of Housing and Urban Development (HUD) has a guide for homeowners facing financial difficulties.

Talk to a Housing Counselor | HUD.gov / U.S. Department of Housing and Urban Development (HUD)

Many homeowners still in trouble

Congress approved $10 billion to help troubled homeowners but the program is complicated and has been slow to launch in many areas, so that much of the money remains unspent, and the troubled homeowners are still in trouble.

In a recent report, the Washington Post estimated that about 1.8 million homeowners are still in forbearance, meaning that they have been able to delay making mortgage payments. They will be left high and dry when the program ends.

Another 1.5 million are at least three months behind on their mortgage payments and may be facing foreclosure or other actions, the Post said.

A somewhat smaller number of homeowners were never eligible for the program because their mortgages are not federally insured by the Department of Housing and Urban Development, the Department of Veterans Affairs, the Agriculture Department and the Federal Housing Finance Agency.

The Consumer Financial Protection Bureau offers help for homeowners trying to understand their options under the programs set up by the various agencies.

Mortgage forbearance during COVID-19: What to know and what to do | Consumer Financial Protection Bureau
Many homeowners are struggling to make mortgage payments as a result of the coronavirus pandemic. Here is information you can use, about your options and your rights.

U.S. PIRG, a consumer research and advocacy group, has extensive information about forbearance on its website.

James R. Hood

Jim is a publishing entrepreneur and journalist. He founded ConsumerAffairs in 1998 and earlier was the founder of Zapnews, after holding executive posts at the Associated Press.