Although millions of homeowners have recovered financially and resumed their mortgage payments, concerning trends in the housing market prevail. As of November 2020, 3.7 million homeowners who had entered forbearance since the pandemic began had exited forbearance. But 3.2 million homeowners continue to struggle, including 2.8 million homeowners who remain in active forbearance and 369,000 homeowners who are delinquent on their mortgage payments and are not in active forbearance. Many of those in active forbearance have reached their sixth month in forbearance, requiring them to either exit forbearance or ask their servicers for an extension.

At a recent webinar, Urban Institute researchers presented evidence of a sizable number of households who are delinquent on their mortgage payments without pursuing loss mitigation, a lack of homeowner awareness of repayment options, and stark disparities in housing payment status by race, ethnicity, and income. Following the presentation, leading housing experts identified three priorities for policymakers, mortgage servicers, and financial institutions to help struggling homeowners.

1. Reach the 369,000 borrowers who are delinquent but are not in forbearance

   About 775,000 borrowers who have become delinquent since the outbreak of COVID-19 are behind on their mortgage payments. Among those borrowers, 299,000 did not enter forbearance and 476,000 became delinquent after they exited forbearance. And although 85 percent of borrowers who became delinquent after they came out of forbearance are working with servicers to institute loss mitigation, 15 percent (40,000 borrowers) have not entered loss mitigation. The number of homeowners coming out of forbearance and falling delinquent again will likely grow when the one-year forbearance period ends in the spring.
   
   

   Dana Dillard of Housing Finance Strategies and Lisa Rice of the National Fair Housing Alliance pointed out that many households facing multiple issues need help navigating their mortgage options. These households may be experiencing health issues, struggling with schooling their kids, and stressing about unstable employment. Even if servicers try to communicate and make the process easy for clients, navigating complicated forbearance and repayment options can be challenging. US Department of Housing and Urban Development–approved housing counselors who understand consumer needs, the local community, and available options for consumers can help. Ellie Pepper of the National Housing Resource Center reminded listeners that housing counselors helped homeowners receive better loan modifications during the foreclosure crisis, and with appropriate funding, they are well positioned to do the job in the current crisis.

   Meg Burns from the Housing Policy Council stressed the importance of a broader awareness campaign to better inform households in need. There are ongoing efforts to reach out to homeowners who are not taking advantage of forbearance and failing to make their mortgage payments, but the industry could better reach these households with better data. There is a lack of information about who these borrowers are and where they are located, as well as scarce data in the private-label securities space.

2. Prepare for homeowners to exit forbearance this spring

   The 2.8 million homeowners who remain in forbearance are likely to end up in worse financial shape than the 3.5 million who exited forbearance earlier. Borrowers who continued to make mortgage payments during the forbearance period and those with government-sponsored enterprise loans were more likely to exit forbearance after the six-month period. Households that are still in forbearance, not making payments, and scheduled to come out of forbearance next year will need additional support. About 23 percent of households in forbearance said they did not know whether they will have to make an increased monthly payment or a lump-sum payment to their mortgage servicer once forbearance ends. Fifty-four percent of households said they have no or slight confidence that they will be able to resume monthly payments when forbearance ends.

   Panelists were concerned about these numbers and emphasized the need for a better communications plan from the industry. Burns noted that households will have unique financial situations as they exit forbearance, which will affect how much they can afford to pay each month.

   To account for their distinct needs, Burns suggested servicers should provide borrowers with various program options. Diane Thompson of the National Consumer Law Center agreed, but stressed that forbearance and repayment options should be clear and streamlined to avoid confusing servicers and consumers. She also emphasized the need for better government standards to bring clarity to the market.

3. Address inequalities across race, ethnicity, and income

   Data show that households of color and those with lower incomes are more likely to fall behind on their housing payments. Pepper and Rice noted that the racial, ethnic, and economic inequalities that existed before COVID-19 could worsen as the pandemic continues.

   Rice offered solutions to address these racial and economic disparities, such as halting negative credit reporting and strengthening antidiscrimination laws. Rice also proposed a COVID-19 bond—similar to the concept of a baby bond—that could provide direct funding to those who have been hit hardest by the pandemic. Thompson suggested providing automatic forbearance for those who are more than 60 days delinquent because early intervention is often more effective in helping households get back on track. Burns stressed that we need to provide more direct financial support to consumers, pointing out that consumers have used soon-to-expire unemployment benefits and stimulus checks to make mortgage and rental payments.

All the panelists emphasized the importance of telling the human stories behind these data. Although the numbers are critical, linking the data to families and individuals through a compelling narrative is the best way to reach a wider audience and drive change. Crises will happen again, and the housing industry cannot reinvent ad hoc responses each time. Vulnerable homeowners deserve better policies and systems to enhance their financial resilience to weather COVID-19 and future crises.