Mortgage lenders Fannie Mae and Freddie Mac will suspend foreclosures and evictions for at least 60 days as federal and business leaders respond to the growing COVID-19 crisis that will cost people their jobs and likely tip the economy into a recession.
In a statement Wednesday, the Federal Housing Finance Agency said the suspension by the mortgage giants applies to homeowners with a single-family mortgage, backed by either company.
“This foreclosure and eviction suspension allows homeowners with an Enterprise-backed mortgage to stay in their homes during this national emergency,” said FHFA Director Mark Calabria in a statement.
The agency announced earlier this month Fannie Mae and Freddie Mac would offer payment forbearance – the option to suspend mortgage payments – because of hardship related to the pandemic.
Separately, Department of Housing and Urban Development Secretary Ben Carson said that the Federal Housing Administration will be putting a sixty-day moratorium on foreclosures and evictions of single family homeowners.
“Today’s actions will allow households who have an FHA-insured mortgage to meet the challenges of COVID-19 without fear of losing their homes, and help steady market concerns,” said Carson said in a statement. “The halting of all foreclosure actions and evictions for the next 60 days will provide homeowners with some peace of mind during these trying times.”
The moves could affect millions of Americans teetering on the brink financially, as the coronavirus pandemic roils financial markets, erases savings and leads a growing number of businesses to lay off workers.
In the statement announcing the Fannie Mae and Freddie Mac suspensions, FHFA director Mark Calabria said that “borrowers affected by the coronavirus who are having difficulty paying their mortgage should reach out to their mortgage servicers as soon as possible.”
Meanwhile HUD is directing mortgage servicers to immediately stop all new foreclosures, and suspend those already in progress. It is also calling for a halt to all evictions of those living in FHA-insured single family homes.
Homeowners with mortgages overseen by HUD are typically among the most vulnerable.
“A very large portion of FHA insured mortgages are for borrowers who are deemed a little risky,” says Michela Zonta, senior policy analyst with the Center for American Progress. “So you will have more low income people, more people of color that receive those mortgages. … I think it’s a good thing that HUD is basically suspending those foreclosures.”
But she says, the designated time frame for relief may be too short.
“Assisting homeowners and renters until just the end of April … is not going to solve the problem,” Zonta says, adding that an economic downturn will likely last far longer than the spring. If “people are losing jobs, are not paying their rent or mortgage, for them to get back to normal is going to take a long time. And if we don’t ensure that people can stay in their homes, we’re going to make a mistake.”
There are also others who need assistance, Zonta said, including small scale land lords who depend on income from renting out one or two apartments, and the larger population of tenants, a group that includes some of the lowest income earners in the country.
“Renters are at the largest risk right now,” Zonta said. “We have to pay attention to them and at the same time ensure that homeowners don’t get foreclosed on.”
Several cities have taken steps on their own to protect tenants. Los Angeles, Seattle, and Detroit are among those that have passed moratoriums on evictions from rental housing.
The federal government, local officials and businesses are scrambling to respond to the spread of coronavirus as the U.S. death toll reaches 115. Many businesses have closed stores throughout the country, while Trump has invoked wartime authority to deal with the crisis.
John Fritze contributed to this report. Follow Brett Molina on Twitter: @brettmolina23 and Charisse Jones @charissejones