COVID-19 Pandemic Exasperated Existing Housing Insecurity
During the height of the COVID-19 pandemic, unemployment in the U.S. skyrocketed to a high of 14.7% in April 2020, exasperating existing housing insecurity and racial disparities among homeowners. In the second quarter of 2020, the mortgage delinquency rate, referring to the percentage of loans with payments past due, reached 8.2%, the highest it’s been in over a decade. To remedy the financial strife that fueled this trend, the U.S. government passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act which, among numerous measures, expanded mortgage loan payers’ ability to receive a forbearance.
The pandemic hit American families hard financially. For some, this was due to the sudden wave of layoffs and decreased hours for many workers. For many small business owners, they suffered due to decreased consumer rates for in-person businesses–Americans significantly decreased their spending on food away from home, apparel and services, alcohol, and entertainment during the pandemic. And many families had COVID-19-related expenditures such as healthcare and childcare as schools around the country went remote.
The industry that experienced the most severe increase in joblessness rates was the service industry where many work for low pay in occupations such as food preparation and personal care support. This industry’s joblessness rate rose 8.6% from the previous year to a high of 13% in 2020. These were the people who, if they were previously employed homeowners, would have most struggled to keep up with mortgage payments.
The existing racial disparity in the portion of those behind on their mortgage payments was made particularly evident during the pandemic, particularly the disparity between White homeowners and Black homeowners. While White homeowners’ mortgage delinquency rate stayed relatively close to the average mortgage delinquency rate–around 4% just before the pandemic–the rate of mortgage delinquency among Black homeowners was 18% in December 2020
The most recognizable aid provided by the federal government to ease the financial burden that was brought on by the pandemic was the COVID-19 stimulus checks. These checks were helpful in buying time for rent payers and providing spending money for families but did little to aid those struggling with their mortgage payments or other large loan payments. For those people, the federal government passed the CARES Act.
This act was intended to ease the financial hardships that came with shutdowns and unemployment. Among various welfare expansions like increased unemployment assistance and a pause on federal student loan payments, this act provided mortgage assistance through the option to request up to a year of mortgage forbearance if affected by the pandemic.
Forbearance is a temporary pause or reduction on mortgage payments, at the end of the forbearance period borrowers must then pay the missed payments. Under section 4022 the act allows affected borrowers with federally backed mortgages to contact their servicer to begin an 180 day forbearance that may be extended an additional 180 days upon request. Forbearances granted under this section are not subject to any fees, penalties, or additional interest beyond the scheduled interest payments.
CARES Act funds expired September 30, 2021 and to a great extent the mortgage industry and borrowers have recovered. In August 2023, mortgage delinquency rates were down to 3.37%, the lowest recorded delinquency rate. This is attributed to a recovered workforce and low-interest rates, but it is also in large part due to the financial relief legislation like the CARES Act provided in keeping family homes from foreclosure.
