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With mortgage relief in place, stimulus deal targets homelessness, public housing

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While the terms won’t apply to everyone, it’s a good start

HUD headquarters, a gray brutalist building. Getty Images

Federal lawmakers came to an agreement early Wednesday on a $2 trillion stimulus package that will provide additional funds to aid the homeless and potentially provide rental assistance to Americans who have been impacted by the economic fallout of COVID-19.

The stimulus deal comes a week after President Donald Trump announced a sweeping moratorium on foreclosures for homeowners with mortgages backed by Fannie Mae or Freddie Mac or Federal Housing Administration mortgages on single-family homes. Federal regulators are also allowing payment deduction or deferral on mortgages backed by Freddie or Fannie for as long as year for those who have lost income or employment because of the novel coronavirus fallout.

What specific relief a homeowner will get depends on their situation, but terms have not been made public. According to NPR, federal regulators believe the entire mortgage industry will follow suit with providing relief, so if you’re in trouble, contact your mortgage servicer immediately. (You can find your servicer’s contact information on your mortgage statement.)

The housing measures in the stimulus package include $4 billion in grants to assist homeless shelters, $5 billion toward Community Development Block Grants (which can be used for rental assistance), $685 million for public housing, and $1.25 billion toward tenant-based rental assistance (housing vouchers).

The homeless are particularly vulnerable to the novel coronavirus, as they have no real ability to shelter in place. A homeless man in Houston, for example, was released back onto the streets after being treated at a hospital. The additional funding can help shelters better protect the homeless from getting—and spreading—the virus.

FHA loans and public housing residents account for more than 9 million households, while Freddie- or Fannie-backed mortgages account for the majority of single-family homes. The Freddie and Fannie moratorium will last at least 60 days.

The moves come in response to the economic fallout caused by the spread of COVID-19, commonly referred to as novel coronavirus, which could lead to unemployment rising as high as 20 percent, according to Treasury Secretary Steve Mnuchin.

Fannie Mae and Freddie Mac are guarantors on the majority of mortgages, which they buy and bundle into bonds called mortgage-backed securities. Most mortgages fall into this category, as 97.7 percent of mortgage securities were issued by the agencies so far in 2020, according to the Urban Institute.

This means if you have a mortgage, it was mostly likely sold to Freddie or Fannie and thus the foreclosure moratorium and payment relief likely applies to you. Homeowners who don’t have mortgages backed by Freddie or Fannie are likely to be subprime borrowers, condo owners, or owners of particularly expensive housing (the loan limit amount varies from county to county).

These measures may end up temporarily staving off disaster for the housing market. Otherwise, if unemployment spikes and homeowners default en masse, it would lead to a massive increase in available housing, reminiscent of the financial crisis of 2008.

In addition to the additional funding in the stimulus package, the Department of Housing and Urban Development (HUD) announced last it will encourage local public housing authorities (PHAs) to suspend evictions on public housing residents.

The moratorium on evictions of public housing residents, the majority of whom are elderly and/or disabled, would apply to more than a million households if every public housing authority adopted a moratorium. HUD does not have the legal authority to force PHAs to suspend evictions, but many of the largest ones have already done so, including New York, Boston, and Los Angeles. It is likely many others will follow.

The moratorium does not apply to housing voucher holders. HUD Secretary Ben Carson told the Los Angeles Times that an eviction moratorium for FHA-backed multifamily housing could be coming, but housing voucher recipients may need Congressional action. The stimulus deal provides $1.25 billion in additional funding for housing vouchers and $5 billion in Community Development Block Grants, which are dispersed to local jurisdictions to use at local government’s discretion on a wide variety of community development projects. Rental assistance to those experience economic hardship is among the possible uses.

Public housing projects have been strained since the outbreak of the novel coronavirus. Because PHAs are receiving less in rent, many are having to use funds that would typically go toward repairs and maintenance for basic operations such as paying staff and basic bills. The $685 million will help alleviate public housing’s budget shortfall.

While these measures protect millions of Americans, renters in private-market housing remain vulnerable to eviction should they suffer financial hardship because of the novel coronavirus.

But cities across the country—particularly those with expensive housing—have independently announced moratoriums on evictions that range from two weeks to indefinitely. New York, Los Angeles, San Francisco, and Miami are among the cities that have issued eviction moratoriums.

The private sector is responding to the crisis as well. Bank of America announced Thursday that it is offering relief to consumers and small business owners experiencing hardship because of the coronavirus, which will include mortgage payment deferrals. It will be done on a case-by-case basis and will run month-to-month.

JPMorgan Chase and Wells Fargo say they are also working with borrowers who have been impacted by the economic fallout of the novel coronavirus to provide relief, according to NPR. The situation is incredibly fluid, so if you are struggling, it’s important to contact your mortgage servicer as soon as possible.