Compliance Blog

On March 1, the Consumer Financial Protection Bureau (CFPB) issued a report about the impact of the COVID-19 pandemic on housing insecurity. The report’s executive summary notes that “this report summarizes some of the relevant data and research on the impact of the pandemic on the rental and mortgage market, and particularly its impact on low income and minority households.”

Housing insecurity, as described in the report, refers to families that lack access to housing that is safe, affordable, and stable. The report indicates that housing insecurity has been associated with the following:

• Higher levels of depression;
• Higher levels of disciplinary problems at school;
• Greater likelihood of developing chronic health conditions; and
• Greater likelihood of exposure to the Coronavirus because of the difficulty in complying with quarantine and social distancing public health requirements.

The report discusses how “housing insecurity has disproportionately affected communities of color.” The report cited research showing that Black and Hispanic borrowers during the Great Recession were 76 and 71 percent more likely to lose their properties through foreclosure than white borrowers. The report also cited research noting that there has been a correlation between eviction moratoria and other similar government actions during the pandemic and lesser transmission and mortality rates from the Coronavirus.

The report presents some troubling data with respect to housing insecurity:

• Unemployment in certain sectors remains high when compared with year-over-year data—the leisure and hospitality industry, which the report notes disproportionately affected low-income households, experienced employment levels in November 2020 that were down 23% from 2019;
• Data from the Federal Reserve Bank of St. Louis evidence that the unemployment rate for whites at the end of 2020 was around 5.9% while it was approximately 9.9% and 9.3% for Blacks and Hispanics, respectively;
• The report describes that the unemployment rates for Black adults and Hispanic adults at the end of 2020 were 3.9 and 5.0% higher than pre-pandemic levels while the unemployment rate for white adults at the end of 2020 was 2.9% higher than pre-pandemic levels;
• The number of homeowners who are not current on their mortgage loan payments has risen from 3% of mortgages at the beginning of the pandemic to 6% as of December 2020, and over 2.1 million borrowers were more than three months in arrears;
• In December 2020, approximately 8.8 million rental households were not current on rent, and data cited by the CFPB suggests that more than 25% of renters with incomes under $25,000 were not current on rent;
• The CFPB’s analysis of a Census Household Pulse Survey from December 2020 evidences that Black and Hispanic households were much more likely to be behind on rent or their mortgage payments than white households (22% of Black households in the survey, 18% of Hispanic households in the survey, and 7% of white households in the survey);
• Data from the Mortgage Bankers Association’s National Delinquency Survey for the third quarter of 2020 notes that 5.2% of all mortgage loans were delinquent while 10.8% of Federal Housing Administration loans were delinquent, loans that the report suggests “typically serve minorities, low-income borrowers, and first-time borrowers[.]”;
• Data from the Mortgage Bankers Association’s National Delinquency Survey for the third quarter of 2020 shows that there are an estimated 263,000 borrowers who are more than 90 days delinquent on their mortgage payments and have never requested forbearance;
• As of January 2021, data from Black Knight Mortgage Monitor notes that there are more than 2.7 million borrowers in a CARES Act forbearance (e.g., federally backed mortgage loans) representing about $548 billion in unpaid balances for loans in those CARES Act forbearances;
• The same Black Knight source estimates that more than 900,000 borrowers will have been in a CARES Act forbearance for over 12 months by April 2021;

The data seems to reflect similar historical trends seen during the Great Recession, and it suggests the risk of housing insecurity facing homeowners and renters is growing. While foreclosure and eviction moratoria have helped consumers facing housing insecurity, the report notes that what happens after these moratoria end (e.g., borrowers moving from forbearance into permanent loan modifications, servicers initiating foreclosure, etc.) will be critical to assessing housing insecurity going forward. Given the current administration’s focus on promoting and addressing racial equity and the scrutiny that mortgage servicing issues received in the CFPB’s most recent supervisory highlights, credit unions may wish to review their loss mitigation policies and procedures to assess compliance with the requirements in Regulation X and also to determine whether these policies and procedures are being applied equally to all consumers, mitigating any fair servicing risk that might arise.