In the aftermath of the COVID-19 recession, most homeowners are on their way toward a recovery. This is thanks, in part, to federal loss mitigation policies to help homeowners keep their homes. But data indicate some homeowners who are still experiencing financial and economic stress—particularly those with low incomes and homeowners of color—need additional assistance.
Because of structural barriers, including the legacy of discriminatory policies and practices, these groups already faced disproportionate financial distress before the pandemic. The pandemic only magnified these challenges.
To help, the US Department of the Treasury is providing financial assistance through the Homeowner Assistance Fund (HAF) (PDF). The HAF targets homeowners with low incomes and “socially disadvantaged homeowners,” defined as those whose abilities to own a home have been impaired because of diminished access to credit based on circumstances beyond their control, such as belonging to a group that suffers from a history of racial prejudice. The financial assistance can be used to cover monthly mortgage costs, property taxes, and utilities or home energy services.
The Urban Institute recently convened a group of housing experts to explore what it would take to ensure the HAF succeeds. They emphasized that the following will be critical: states will need to identify and reach homeowners at risk of foreclosure; HAF funds must reach homeowners in a timely manner to prevent foreclosures; and measures of success will be needed to gauge progress.
Considerations for reaching homeowners
The Urban Institute recently released a data resource to help state and local policymakers identify eligible homeowners and places that face elevated foreclosure risks. It includes information about foreclosure risk by county, income distribution, and the racial composition of homeowners in counties across the country.
Reaching struggling homeowners is another story. At the event, panelists discussed a couple considerations policymakers should consider when reaching out to homeowners.
Making hard-to-reach groups aware of the HAF is vital.
Tony Walters, executive director of the National American Indian Housing Council, highlighted the challenge and importance of connecting with hard-to-reach groups. For example, tribal communities—many of which are located in rural or isolated parts of the country (PDF)—may not be aware of the program or have the necessary infrastructure to receive funds. Walters suggested engaging with community partners and housing counseling agencies is critical for connecting with these groups.
Ensuring streamlined communication will be key.
Lisa Sitkin, a senior staff attorney at the National Housing Law Project, underscored the communication role servicers can play. They send notices to borrowers and provide important information on their websites, but trust gaps often exist between them and homeowners, so community leaders can help bridge the groups.
Sitkin also emphasized that consistent collaboration and communication between servicers, investors, the Treasury, and HAF program administrators is critical to the HAF’s success.
Considerations for deploying funds
Distributing funds presents its own challenges, so panelists discussed several strategies policymakers could pursue to break down barriers.
Apply lessons from other federal programs.
Meg Burns, executive vice president of the Housing Policy Council, suggested studying the successes and challenges of previous and existing federal assistance programs when developing distribution plans for the HAF. Successful programs are simple and efficient and generally do not impose extensive, complicated rules and requirements to determine eligibility, assess need, or apply funds.
Lessons learned from the Emergency Rental Assistance (ERA) program emphasize the need to avoid complex rules and program designs that may delay HAF implementation. Granular targeting of vulnerable populations is an important goal but should be balanced with distributing funds as quickly as possible.
Center communities’ unique needs.
I (Michael) discussed the challenges in low-income areas that may lack internet service. These households lack the opportunity to apply for funds through the internet data portals created to streamline allocation, suggesting more direct outreach strategies will be needed. Engaging trusted community organizations, such as housing counseling agencies, religious organizations like Black churches, and advocates, can also help bridge trust and information gaps to reach people in these communities.
Standardizing infrastructure can help with distributing funds efficiently.
Rollout of the Hardest Hit Fund after the Great Recession shone a spotlight on the differences between state housing and finance programs, and how these differences created delays and challenges in implementation. Stockton Williams, executive director of the National Council of State Housing Agencies, said standardizing processes and resources across states will be crucial for the HAF.
Standardized templates for a common data file, servicer and state collaboration agreements, and borrower authorization forms still exist from previous programs and could help ensure the HAF can deploy funds quickly and effectively across states.
Establishing common metrics for success at the outset of the HAF program is key to ensuring it meets its goals. The ERA’s defining metric of success was the dollar amount distributed, but other metrics, such as the number of homeowners who remain in their homes, could be more appropriate for the HAF. Researchers and industry experts will play vital roles in establishing which metrics will be appropriate given the complicated trade-offs and policy choices.
The Treasury’s Will Corbett acknowledged we have better and more streamlined loss mitigation tools to restructure debt than we did during the Great Recession. HAF dollars will likely be available after most borrowers have already gone through loss mitigation.
Loss mitigation and the HAF are two tools with their own complexities; the former restructures debt, and the latter reduces it. As it’s currently structured, using the HAF must come either before or after loss mitigation tools have been employed, not simultaneously. However, given that HAF dollars are a limited resource (PDF), we strongly recommend that these funds be used after other loss mitigation tools are exhausted. Whatever the order, the combination of loss mitigation solutions and the availability of HAF dollars will support a more robust recovery.
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