The brunt of the COVID-19 pandemic is hitting communities of color hardest, whether it be housing, small business, employment, education or health. Unfortunately, the typical government response in such times is to take a one-size fits all approach, and in this case that will merely add cement to the boots of the US’s long and disturbing legacy of inequality.
As experienced housing executives having worked at the epicenter of prior crises, we foresee a series of unfortunate outcomes for housing. Unless our federal government, the lending industry and civil leaders take bold, quick action, millions of people – disproportionately Black, Latino, young, women, and lower income – will suffer needlessly and our collective ability to rebound from the COVID-19 pandemic and economic crisis will be hampered.
The pandemic is laying bare the systemic inequities that have long plagued the nation. This is particularly unfortunate given we should be celebrating national Fair Housing Month in April. The racial wealth and homeownership gaps – which are growing, coupled with disparities in access to key amenities and resources such as healthcare, healthy foods, clean environments, and credit, are contributing to the horrible news gripping our headlines.
People of color are contracting and dying from the coronavirus at frighteningly higher rates than the general population. The Great Recession exacerbated racial and wealth inequality and without action, this crisis will also. For instance, the black homeownership rate has seen the most dramatic drop of any racial or ethnic group since 2001. Black homeownership remains at levels not seen since the Fair Housing Act was passed in 1968. The starting line was pushed back for many Blacks and Latinos when the COVID-19 crisis hit. To catch these communities up will require intentional policy that puts equity at the core.
Given we have yet to resolve persistent national systemic inequities in housing, the very solutions the federal government has stood up appear poised to deepen the harm of the crisis. One byproduct already emerging is undue tightening of credit in the mortgage markets. At a time when interest rates are at historic lows, some lenders are tightening guidelines on refinancing and purchase lending based on borrower credit score and down payment – variables known to impact borrowers of color who have lower wealth and who have, on average, lower credit scores. And the pernicious cycle goes on as credit tightens and prospective borrowers of color are the first to be harmed.
This credit tightening is occurring because the CARES Act, which requires mortgage servicers to provide up to 12 months of forbearance to borrowers who need it, did not contemplate that servicers will have to advance principal, interest, tax, and insurance payments on behalf of these borrowers when they miss payments. The more difficult it is for servicers to pass through these payments, the tighter the credit box. More than 3 million homeowners have already requested mortgage forbearance to date and this number will only grow.
To be prudent, policymakers must first do no harm. Without action, a number of nonbank mortgage servicers – who provide the largest share of loans to Black and Latino homeowners – may be forced to withdraw or severely reduce lending.
We submit the Federal Government should immediately initiate a public service ad campaign and public facing website to inform borrowers with critical information about help available to them. Part and parcel of the campaign should be new policy that streamlines mortgage processes and encourages innovative tools to expand mortgage availability so that creditworthy borrowers have equitable access.
Solutions that ensure stability for existing homeowners are equally important. FHA should lead with housing counselors reaching out to COVID-19 distressed borrowers while concurrently embracing alternative credit provisions to expand mortgage credit. Ensuring use of the full suite of HUD programs, including fair housing provisions, can help guarantee eligible consumers have access to quality, affordable credit throughout and after the pandemic.
Legislators drafting a COVID-19 add-on package must apply an equity lens to the provisions in the bill. We suggest ensuring mechanisms are in place that protect consumers, add market certainty and provide liquidity so credit can flow unimpeded to borrowers of color.
We stand ready to act with industry, regulators and policymakers on the path forward to sustain and preserve homeownership for those most at risk. We cannot let consequential knee-jerk reactions get the best of us. If we put consumers on stable footing, everyone wins. The hard work begins now, and we urge everyone to design with equity in mind, and at all costs not compound this horrific health crisis with a housing crisis.