What comes after ban on foreclosures, evictions?
Housing counselors still don’t know, but they’re preparing for a surge
The demand for foreclosure prevention services at Advantage Credit Counseling Service, a nonprofit on the South Side, should paint an optimistic picture about housing during the COVID-19 pandemic.
Calls from homeowners worried about foreclosure have fallen, while interest from homebuyers has surged, according to co-President and CEO Mary Loftus.
In a normal year, that would likely be a good thing. But in a year upended by a global pandemic, it points to an uneven economic recovery and the hidden impact of lost jobs and lower income for some homeowners.
A complicated web of rules and regulations meant to help renters and homeowners stay in their homes contributed to a decline in evictions and foreclosures in 2020 — but the numbers may mask what is to come in 2021.
The programs set up to prevent people from losing their homes aren’t set to end anytime soon. Homeowners with federally backed loans should be protected from foreclosure through the end of June. The federal eviction moratorium is set to expire at the end of this month, but Pittsburgh City Council has its own ban that will last until the city ceases its COVID-19 emergency declaration.
When the deadlines do hit, housing counselors still don’t know what to expect.
“We just don’t know what the financial conditions of homeowners are at this point,” Ms. Loftus said. “It’s not just the mortgage that they may be dealing with. They may have delinquent utilities, insurance, car repairs. … A lot of that comes into play that makes it doubly hard to deal with their mortgage.”
‘Prioritizing where that money goes’
Thousands of Pennsylvanians are worried about making their payments on time, according to February survey data from the U.S. Census Bureau.
For homeowners, missed mortgage payments could lead to foreclosure, the process in which the mortgage lender moves to take ownership or sell the home to recover the lost money. For renters, missed rent checks could lead to eviction, when a landlord removes them from the property.
More than 9,800 homeowners in the state said it was very likely they would have to leave their home due to foreclosure in the next two months, according to the survey data. And 47,700 renters reported they could lose the roof over their head to eviction.
“If you’re operating on half the income you made before, it really starts to be a matter of prioritizing where that money goes,” said Anne Schwan, a housing and financial counselor with NeighborWorks Western Pennsylvania, another Pittsburgh housing organization that hasn’t seen the demand for services that it anticipated.
When people do call, Ms. Schwan said, they’re looking to find questions they should be asking their lender to determine what options they have to avoid foreclosure down the line.
The first ban on foreclosures and evictions went into effect in
March 2020 and came with legislation to provide rental and mortgage assistance for tenants, landlords and homeowners.
The first iterations of those programs in Pennsylvania were bogged down with problems that led to homeowners and tenants missing out on $108 million of the $175 million in federal funds allocated last spring. County and city officials announced another round of $36 million in emergency rental assistance in February, funded through the federal COVID-19 relief bill signed into law in December.
Now, the federal government is again debating another round of economic relief, which could include $25 billion for rental assistance.
False sense of safety
In 2020, foreclosure filings across the country did drop.
Nationally, filings were down 57% compared to 2019, according to a January report from Attom Data Solutions, an Irvine, Calif.-based company that collects foreclosure data. Filings for 2020 were down 93% from a peak in 2010 and hit their lowest level since the company began tracking the statistics in 2005.
Properties with foreclosure filings last year represented 0.16% of all U.S. housing units, or 214,323 properties, Attom reports.
In 2010, foreclosure filings affected 2.23% of U.S. housing units.
When the ban is lifted, the impact will hit homeowners differently depending on their economic situation, their loan and their lender, said Jeffrey Fondelier, vice president of operations with Blueprints, a nonprofit in Washington County that offers services for homeownership and rental assistance.
“For some, it will be immediate; for others, we’ll be able to intervene effectively and buy time,” he said.
Buying time could include applying for other sources of funding or modifying parts of the loan, but it’s hard to predict how mortgage lenders will react once the moratorium is lifted, he said.
Forbearance and repayment
For homeowners, the federal legislation also opened up the option to go into forbearance (when a lender temporarily pauses or reduces payments) and removed some of the consequences that normally come with missing mortgage payments, like a big hit to credit scores.
Some people have been making partial payments toward their overall bill, but all homeowners will be on the hook to make up the missed checks once the period of forbearance ends.
“When [forbearance] ends, for some people when they see the amount that might be owed at that point, I can see some homeowners panicking,” said John Arentzen, a housing counselor with Advantage Credit Counseling Service.
It’s likely homeowners won’t have to pay all the missed months back at once — something that would be overwhelming, Mr. Arentzen said — but the specifics of what happens once the forbearance period ends depends on the type of loan and the lender.
‘K-shaped’ recovery
The unequal impact of the COVID-19 pandemic on finances — and therefore housing options — seems to be playing out in the increasingly common description of the recovery as “K-shaped.”
At one end of that K, some people whose finances have not suffered are using extra savings and stimulus checks to take advantage of low interest rates to purchase a new home or even an additional property.
Ms. Loftus from Advantage Credit Counseling Service saw interest in buying “skyrocket” in June, from an average of 66 clients a month from January through May to above 100 in the summer months.
One mortgage broker in Shadyside said his company was experiencing its best year since it opened nearly 20 years ago. Ryan Sexton, a loan officer with Movement Mortgage in Bethel Park, said refinancings are booming and purchases have not slowed down. He’s expecting a wave of people looking to buy a second home.
At the other end of the K, homeowners in forbearance are worried about makingtheir next mortgage payments, and renters behind on monthly payments are holding their breath for an eviction notice.
Despite the ban, some of those concerns are already being realized.
About 9,090 properties in Pennsylvania were the subject of foreclosure filings in 2020, according to Attom Data Solutions. The Pittsburgh region reported foreclosure filings on 1,879 properties.
Most of the region’s filings occurred in Allegheny County, which saw 1,309, while neighboring counties such as Beaver, Butler and Fayette reported about 50 each.
Meanwhile, for renters in 2020 there were 5,222 eviction filings in Allegheny County, according to data from Carnegie Mellon University’s Create Lab. That’s down from 13,705 in an average year, said project scientist Anne Wright.
A temporary lapse in the moratorium in September could give an indication of what’s to come: In one day, Allegheny County saw more than 180 eviction filings.
Shot of Novocain to housing market
Michael Suley, a former real estate broker and former president of the Realtors Association of Metropolitan Pittsburgh, thinks of the moratoriums on foreclosures and evictions as a shot of Novocain: It dulls the pain in the moment but won’t help homeowners, tenants and landlords once the ban lifts and payments are due.
“It’s good to pump money in there. … This will help you through the next six months, but what happens after that? Nobody talks about that,” he said. “Having a moratorium or giving people a handout is fine in the short term, but … I don’t know where this is going to end up.”
Mr. Suley, who is also a former county property assessment director and board member, doesn’t expect another Great Recession. But, he cautioned, don’t ignore the people who own their homes and are worried about losing them.
“We saw that 12 years ago,” he said. “And it was ugly.”
In Washington County, Blueprints has already hired two additional housing counselors to prepare for an anticipated uptick in need when the ban on foreclosures ends.
“There is the concern that if that ends on April 15 or April 30, that our phones will ring off the hook and our capacity will be tapped,” Mr. Fondelier said.
“We know that the moratoriums are going to come to an end, and there is the concern that people will be in an incredibly tenuous situation,” he said. “They’re going to need us.”