Select Subcommittee Investigation Reveals Homeowners Face Deepening Financial Distress
Washington, D.C. (October 16, 2020) — Today, Rep. James E. Clyburn, Chairman of the Select Subcommittee on the Coronavirus Crisis, sent a letter to Mark Calabria, Director of the Federal Housing Finance Agency (FHFA), revealing that more than 30,000 delinquent homeowners did not receive mortgage forbearance and urging FHFA to take action to prevent foreclosures.
“I write today to urge you to take swift action to assist homeowners,” the Chairman wrote. “Specifically, FHFA should direct Fannie Mae and Freddie Mac to require mortgage servicers to automatically grant forbearance to borrowers who are delinquent for sixty days or more. Although forbearance is currently an option for delinquent mortgage holders, data recently obtained by the Select Subcommittee show that a substantial number of delinquent borrowers, particularly borrowers with the lowest incomes, had not obtained forbearance as of August 2020 and are in need of financial relief.”
On July 27, 2020, Chairman Clyburn sent letters to Fannie Mae and Freddie Mac seeking information on delinquent loans and urging the entities to help homeowners and renters avoid foreclosure and eviction. FHFA responded on behalf of both entities, producing some responsive information while withholding other information.
Data obtained from FHFA shows that the number of homeowners in forbearance rose dramatically, from 8,827 homeowners in January 2020 to 1,149,245 in June 2020, after the CARES Act extended the availability of forbearance. However, not all homeowners who were delinquent received forbearance. More than 31,000 homeowners who were over 60 days delinquent on their mortgage in August had not received forbearance.
The data shows that lower-income borrowers in delinquency received forbearance less often than those with higher incomes. Among lower-income borrowers (those with incomes of 80% or less of area median income) with delinquent loans, 66% received forbearance in June, while among higher-income borrowers (those with 100% or more of area median income), 77% received forbearance.
The data also revealed geographic disparities. Delinquencies in June were particularly high in Connecticut, Florida, Hawaii, Louisiana, New Jersey, and New York. In each of these states, more than 7% of homeowners with federally-backed mortgages missed at least one monthly payment. Homeowners in Puerto Rico were in even more severe financial distress, with nearly 20% of homeowners delinquent.
A report from the FHFA Inspector General shows that mortgage servicers have provided incomplete or inaccurate information to borrowers about their options for financial relief. Surveys show that many borrowers are uninformed or misinformed about forbearance.
Today’s letter requests that FHFA direct Fannie Mae and Freddie Mac to implement automatic forbearance for borrowers who are 60-days delinquent—a step included in the House-passed Heroes Act.
In addition, today’s letter urges cooperation with the Select Subcommittee’s inquiry:
“It is also critical that FHFA produce to the Select Subcommittee the responsive information that you are currently withholding, which would shed light on homeowners’ struggles to pay their mortgages as the pandemic continues,” The Chairman explained. “The refusal to produce this information is obstructing the Subcommittee’s inquiry and must end.”
Click here to read today’s letter.