Oct 06 '21

After the Mortgage Foreclosure Moratorium: How Credit Unions Can Help

Paul Dionne
Paul Dionne
Research Director
Filene Research Institute
Vy Mai
Vy Mai
Research Intern
Filene Research Institute

Stable housing is a critical component of consumer financial and social well-being. Understanding and responding to the emerging challenges facing homeowners, renters, and landlords at your credit union can contribute to improved and deeper member engagement, and improve member financial outcomes.

Paul Dionne
Paul Dionne
Research Director
Filene Research Institute
Vy Mai
Vy Mai
Research Intern
Filene Research Institute

"Eviction is not a symptom of poverty, but a cause for it."

Credit union involvement in seeking out and alleviating housing distress amid the COVID-19 pandemic can also contribute to more resilient communities. As Matthew Desmond argues in his study Evicted, "eviction is not a symptom of poverty, but a cause for it." If member well-being is part of your credit union strategy and/or your mission, consider taking preventative measures against foreclosure and eviction, which can profoundly affect member’s financial outcomes for years to come.

Now that the federal moratorium has sunset, homeowners risk foreclosure as soon as they exit the forbearance plan. An unchecked wave of foreclosures nationwide would risk destabilizing the housing market for all consumers.

On July 31, the Federal Housing Administration (FHA) foreclosure moratorium for federally-backed mortgages expired after 11 months of protecting vulnerable homeowners. The foreclosure moratorium was part of a series of governmental actions to protect homeowners who have been adversely affected by the COVID-19 pandemic. According to the Mortgage Bankers Association, the number of mortgages in forbearance spiked to 8.46% in June 2020 and has since declined to 3.08% as of September 13th, 2021, which amounts to 1.5 million homeowners. The Consumer Financial Protection Bureau (CFPB) has urged mortgage servicers to take proactive steps to assist borrowers and hold mortgage servicers accountable. CFPB also amended mortgage servicing rules that allow mortgage servicers to streamline the loss mitigation process and establish procedural safeguards to help limit avoidable foreclosures until January 1st, 2022.

Many credit union members are either homeowners, renters, landlords, or a combination of the three, and the housing crisis is affecting the lives of more members every day.

In addition to the end of the foreclosure moratorium, the CDC eviction moratorium was also ended on August 26. Over the past year, the CDC moratorium helped to prevent 1.55 million eviction filings nationwide. Without the moratorium, renters will face an increasing threat of eviction. According to data from an August 2021 Census Bureau survey, 6% of renters across the country - representing more than 3.5 million people - say they are "likely" or "very likely" to face eviction as they remain unable to pay their total rent because of the pandemic. Recently, housing has become so expensive that most full-time, low-wage workers cannot afford a two-bedroom rental. Households of color are disproportionately affected by eviction risk, with 22% of Black renters and 17% of renters of Hispanic or Latino origin behind on rent; whereas, that number for white renters is 11%. Households with children are also overrepresented in the at-risk group, with 19% behind on rent compared to 12% of households without kids (Out of Reach 2021).

Many credit union members are either homeowners, renters, landlords, or a combination of the three, and the housing crisis is affecting the lives of more members every day. Credit unions can take initiative to assist members and connect them to the right solutions.

  • Dedicate resources and staff to support borrowers' assistance.
  • Create a resource hub for members consolidating state and local rental assistance, and communicate it widely with members in need (for example, pull relevant resources from this state-by-state list of Emergency Rental Assistance programs, or link to state-specific aggregate sites such as the California COVID Rent Relief Program).
  • Although the federal moratorium has ended, local moratoriums remain active in some cities and states. Help members find resources for affordable housing, prevent displacement, and reduce family homelessness in your community.
  • Identify renters and mortgage-holding members who may be at risk and check in with them. Proactively reach out to mortgage holders facing a forbearance exit and discuss loss mitigation options.
  • Center philanthropic partnerships around local organizations providing COVID Rent Relief programs, especially for initiatives focusing on securing stable housing .

Taking the first step

Filene provides a number of resources for credit union leaders to consult as the housing economy enters a turbulent period.

        1. Supporting Financial Well-Being of Credit Union Members and Employees

What Filene's research says about supporting financial needs and action steps for putting it into practice. This research bundle provides credit unions with a comprehensive overview of evidence-based strategies to support members' and communities' financial well-being.

        2. Beyond Legacy Lending: Strategies for Loan Growth and Inclusion

    Explore how credit unions adapt to new paradigms for consumer lending while navigating a pandemic economy and advancing the credit union people-helping-people philosophy. This research summarizes five alternatives employed by credit unions in growing lending portfolios as members navigate the uncertain pandemic economy. Explore key insights from credit unions' current and legacy risk assessment models, coupled with responsible lending strategies to meet members' financial needs.

            3. Credit Unions and the Coronavirus: Notes on the Impacts and Implications of the COVID-19 Crisis, Part 3

      This report outlines possible pathways credit unions can take going forward as the pandemic continues. The related worksheet tool identifies business and service priorities through the lens of a projected spectrum of scenarios. Taking the first step to reorient credit unions' and members' prime concerns, especially in the financial future, will go a long way in preparation for what to be done in the here-and-now to prevent the worst possible future outcomes going forward.

              4. Trauma-Informed Services for Credit Union Employees: Part 1, Part 2

        Beyond membership, credit union leaders should also address the mental health impact of the pandemic on their staff. These studies explore evidence-based practices to equip credit union leaders to better address those needs and foster trauma-informed support for employees.

        Resources