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How Best to Avoid Landlord Mortgage Delinquency

As an initial response to the widespread economic woes inflicted by the COVID-19 pandemic, many states and cities have responded with eviction moratoriums to help renters stay in their homes during the pandemic. However, it is easy to see that this is simply a small temporary fix to a substantial problem.

While these measures may keep renters in their homes today, they may easily lead to a flood of evictions the moment the moratoriums are lifted.

Eviction moratoria on their own, as many governments are proposing or enacting, would only address a small part of the crisis,” stated two researchers from the Urban Institute, in a March article. They added that, “Without additional rent relief or flexible cash assistance, moratoria could reduce COVID-19 transmission risks today but create an eviction tsunami later.”

With nearly half of all renters considered rent-burdened—meaning they spend more than 30% of their income on their monthly rent—renters are particularly vulnerable in this current economic crisis.

One proposal on the table is the Rent and Mortgage Cancellation Act, proposed by Rep. Ilhan Omar of Minnesota and backed by a handful of Democratic lawmakers. However, not all housing experts agree.

Instead of an eviction moratorium or rent forbearance, Omar’s bill calls for rents to simply be cancelled. The bill would enact “full payment forgiveness, with no accumulation of debt for renters for homeowners and no negative impact on their credit rating or rental history.”

“In 2008, we bailed out Wall Street. This time, it’s time to bail out the American people who are suffering,” Omar said in a press release announcing her proposal.

Several nonprofits and advocacy groups endorse the bill.

“With no clear end to this crisis in sight, it is impossible for families to prepare for the economic fallout that will come if we are expected to continue to pay rent while we are unable to earn an income,” said Dianne Enriquez, Co-Director of Community Dignity Campaigns at the Center for Popular Democracy, adding “Representative Omar’s bill to cancel rent and mortgages for the duration of the housing crisis would mean that the millions of families across the country who have lost their jobs are able to stay in their homes and not go into crushing debt during this crisis.”

“It’s not as simple as just canceling rent—we are all connected,” said Mary Cunningham, VP for Metropolitan Housing and Communities Policy at the Urban Institute, according to a Forbes article. “Landlords pay state and local government taxes, which fund schools, libraries and parks. To prevent ripple effects, we should just help renters pay their rent.”

Omar’s bill does include a landlord relief fund, but landlords must apply for financial relief from the federal government and must agree to several conditions, including a five-year rent freeze with major penalties for violations, including potential loss of the entire property.

The bill was called “an extreme approach” in an article on JD Spruda.

Matthew Murphy, executive director of the NYU Furman Center for Real Estate and Urban Policy, proposes keeping renters and landlords whole during the crisis by sending more stimulus funds directly to individuals and by providing assistance to landlords to help with taxes, water bills, and more, according to Forbes.

Another potential solution is simply expanding the federal Housing Choice Voucher Program. Cunningham at the Urban Institute wrote earlier this month in favor of this solution, saying “We already have a system for helping low-income renters, the federal Housing Choice Voucher Program.”

However, she mentioned that only one in five households who qualifies for the program actually receives assistance due to under-funding.

“If housing assistance were available to everyone who qualified for it before the pandemic, managing a sudden income loss would be easier to navigate,” Cunningham wrote.

In fact, she favors housing vouchers over additional stimulus funds because vouchers can easily be adjusted to local rent prices—which vary widely from market to market—and they payments would go directly to landlords, ensuring renters keep their homes and communities remain stable.

In total, she estimated expanding the current program to cover those who already qualify and those who recently lost income and need assistance would amount to about $100 billion.

While admitting it is “a large sum,” Cunningham said it “pales in comparison with the cost of the $2 trillion stimulus, and it is critical to preventing large-scale housing instability, eviction, homelessness, mortgage defaults for landlords, and the collapse of the housing market.”

About Author: Krista F. Brock

Krista Franks Brock is a professional writer and editor who has covered the mortgage banking and default servicing sectors since 2011. Previously, she served as managing editor of DS News and Southern Distinction, a regional lifestyle publication. Her work has appeared in a variety of print and online publications, including Consumers Digest, Dallas Style and Design, DS News and DSNews.com, MReport and theMReport.com. She holds degrees in journalism and art from the University of Georgia.

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