Is a Fourth Quarter Housing Crisis Inevitable During 2020?
Of the href="https://www.vanityfair.com/news/2020/04/why-the-coming-mortgage-crisis-may-be-worse-than-the-last-one">$4.6 trillion invested in commercial mortgage loans in the United States, Wells Fargo invested $125 billion, Bank of America $85 billion, and J. P. Morgan Chase holds $65 billion of these mortgages. By April 2020, one-third of
all apartment dwellers in the United States did not pay their rent. href="https://www.vanityfair.com/news/2020/04/why-the-coming-mortgage-crisis-may-be-worse-than-the-last-one"> Nonessential retailers, like Staples Office Supply, the Cheesecake Factory, and Urban Outfitters, are in default on their mortgages or not paying their rent. Restaurants operating on carry out orders only are not paying their rent or meeting their operating expenses.
The Housing and Urban Development Halt to Foreclosures
The U.S. Department of Housing and Urban Development authorized the Federal Housing Administration (FHA) to halt foreclosures and evictions of tenants in rental properties for two months in response to the coronavirus pandemic. Fannie Mae and Freddie Mac back half of all mortgages in the United States and operate under government control since the 2008 recession.
Are Suspended Payments Forbearance or Forfeiture?
Forbearance works for natural disasters, temporary disability, or short-term unemployment, but not for national pandemics. Fannie Mae and Freddie Mac grant up to 12 months of forbearance and add the deficit to the end of their amortized loan, but lenders' policies differ. More than 4 million Americans asked for mortgage assistance by the end of April 2020, and unemployment rates increased throughout May. After 13 years of consistently paying their $2,000 per month mortgage, a church organist and his wife in Maryland were told the bank would forgive their arrearage if he repaid the outstanding payments in full upon returning to work.
Landlords Struggling During the Pandemic Are Unable to Help
A landlord with rental properties in multiple states struggles to make ends meet. His North Carolina tenants all paid in full, but none of his tenants in Michigan did. He can do nothing to improve his financial situation. Half of all the motels in the United States are in default on their mortgage payments, and they need a robust 2020 summer season to pay their mortgage above their operating costs. The chances that a tenant will pay decreases with every passing month, and the landlord has property taxes to pay.
The 2020 Surge in Mortgage Foreclosures
Mortgage lenders postponing millions of payments without additional fees are prepared to lose billions of dollars because the homeowners in jeopardy during 2020 had high credit ratings before the pandemic and substantial equity in their homes. Even though the Bank of America and J. P. Morgan Chase reduced the paperwork necessary to apply for forbearance, as many as two million homeowners in the United States may lose their homes through foreclosure. Mortgage companies may fail without federal investment in the housing market, even though homeowners and business owners who successfully refinanced their properties paid finance fees to their lenders.
Organized Rent Strikes Increased the 2020 Housing Crisis
Renters throughout the United States are in dire straights due to the coronavirus crisis. The $1,200 stimulus check helped some tenants pay their rent, but they also need living expenses. They really are not able to give their entire stimulus check to their landlord. Even the extra $600 per week in emergency unemployment is not enough for some tenants, and others are living on credit cards or their retirement funds until they can go back to work. Tenants who are unable to pay their rent in 2020 tend to work in service professions and the hospitality industry.
The National Low-Income Housing Coalition
The National Rental Home Council, advocating for landlords providing single-family homes for tenants, seeks government reimbursement of unpaid rent to the landlord with reimbursement to the government by withholding their tenants' income tax refunds until the deficit is paid in full. The Urban Institute estimates that, if 20% of the tenants in default need renters' assistance, the cost of reimbursement will be at least $24 billion.
Resolution of the Multifaceted 2020 Housing Crisis
Borrowers who defaulted on their mortgage payments during the pandemic probably do not qualify for refinancing options or loan forgiveness. The FHA offers the best options for the 8.1 million mortgage loans that they guarantee in the United States. Generally, those who carried less household debt will fair better in the recovery face of the economic crisis caused the 2020 coronavirus crisis. Property values may fall, and it may take a decade to recover financially from the COVID-19 financial crisis.
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