The imminent danger facing the affordable housing industry

The economic hardships brought on by the coronavirus pandemic will be long-term, and millions of renters and homeowners could take a serious hit in the coming months, affordable housing experts said at a recent webinar hosted by Freddie mac.

Despite economists’ more optimistic housing predictions for the coming year, one panelist felt that the worst could be yet to come.

“We are going to start 2021 in a very difficult place in regards to a possible wave of evictions, as well as a growing process of forbearance and delinquency,” said Alanna McCargo, Vice President of Housing Finance at the Urban Institute. “Both dynamics are going to be a kind of front and center thing.”

McCargo explained that to avoid a foreclosure crisis, housing professionals must focus on one priority: keeping Americans in their homes.

“That means we have to think about, on the homeownership side, loss mitigation programs that work for the long term,” McCargo said. “This is not a short-term crisis like natural disasters. This is a long-term recession and it will have implications for quite some time. “

How the Mortgage Industry Works Together to Make Housing More Affordable

The problem of housing affordability does not have a single solution, but with the collaboration of the entire housing industry, together we can create more opportunities for more people to achieve long-term sustainable home ownership.

Presented by: Fannie Mae

He said housing leaders will need dig deeper to find solutionsSuch as keeping people in forbearance longer or finding longer-term solutions for borrowers who abandon forbearance. Reducing payments as homeowners recover could be vital, he said.

“All of those things will be really critical in the loss mitigation arena, so keeping people housed will be a priority and one of the toughest challenges we’ll all face,” McCargo said.

The latest data from Mortgage Bankers Association show Fannie mae and Freddie Mac’s lending in forbearance decreased to 3.26% on December 6, an improvement of 8 points. Ginnie mae defaulted loans decreased 21 points to 7.68%. But despite these improvements, more borrowers are again beginning to seek relief with new forbearance requests reaching their highest level since early August. About 1.8 million homeowners were also seriously delinquent on mortgage payments in October, according to data from Black knight.

One way to ensure that borrowers maximize their options is to offer refinances as a form of mitigation.

“I think we should think about refinancing as part of the loss mitigation toolkit,” McCargo said. “People may not be losing their jobs completely, but they are losing some of their income. And these refinances would, in some cases, help families cut their monthly payment in half. That is huge. “

With interest rates hitting another record low this week of 2.67% for a 30-year fixed rate, according to the latest Freddie Mac survey, refinancing a mortgage could allow borrowers to lower their monthly payment significantly.

Freddie Mac Chief Economist Sam Khater speculated on the panel that by refinancing, homeowners could potentially save hundreds of dollars on their monthly mortgage payments, calling it an instant “magic boost” in borrowers’ income. Nearly 20 million Americans could benefit from a refinance, according to some estimates.

But the affordable housing panelists also argued that much of the helping Americans stay in their homes must be done at the regulatory level.

“The innovation is great, but we really have to fix one of the main barriers to affordability and affordable housing, which is local zoning and local land use restrictions, and those issues are very dynamic and very different complex.” McCargo said.

Panelist Christopher Herbert, CEO of the Harvard Joint Center for Housing Studies, agreed.

“As much as I think there are some really good and promising models out there, I think more attention is needed on the regulatory side to make sure these are also in the best interests of consumers,” Herbert said.

And while these affordable housing experts prepare for a difficult year ahead, they remain optimistic.

“I’m optimistic about the narrative and the story and the awareness of the need for more supply,” Khater said. “Because, in my opinion, I think that it is not only the biggest obstacle for the housing market, but it is the biggest obstacle facing the economy because when we have demand going up and supply is fixed, prices obviously go up and that. causes dislocation. . Lesser cause, literally less economic growth. “

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