The Treasury Department's Homeowner Assistance Fund could go a long way in reducing foreclosures if they slowly resume – depending on when it arrives and how it is distributed.
Black Knight's most optimistic estimates suggest that the nearly $ 10 billion
But when and how the money is actually used – and who gets it – depends on how quickly government plans are implemented. They are due to be presented to the Treasury Department by a recently extended and flexible deadline of August 20th, which is a mystery to service providers as loan processing begins in the next few weeks.
“The timing is complicated because customers are giving up patience who are willing to provide assistance, but the government program may not be running,” said Dana Dillard, director of consulting firm Housing Finance Strategies and former mortgage services director.
The funds could start rolling out as the deadlines for the deferral periods increase
Depending on how fast it is processed and what the screening process for it is, HAF money – which was part of the COVID-19 relief package passed by Congress in March this year – could start rolling out some time after the end of summer .
"Assuming the state plans are received, reviewed and approved by the Treasury Department in a timely manner, we expect the programs to run this fall," said Stockton Williams, executive director of the National Council of State Housing Agencies.
If the money distributed through these programs arrives in the next few months, it could coincide with a period starting in September when Black Knight estimates servicers could process 18,000 forbearance exits per day. But the uncertainty of when the funds will be available makes it difficult to incorporate them into the upcoming trainings.
“The funds and programs have not really been rolled out yet, and hardship and indulgence emerge in great numbers in September and October. So we're a little behind in understanding the options at the state level, ”said Faith Schwartz, Founder and Principal, Housing Finance Strategies. "However, the government funds will be a welcome and helpful stopgap solution for consumers who are not fully engaged with the loan service providers or who do not qualify for … loss mitigation. These funds can avoid foreclosures and help those most in need."
Adopting foreclosures slowly can help keep HAF funds effective, even if they don't come right away.
“Moratoria on foreclosure is technically ending or has ended, but it's a multi-layered restart. Abandoned properties and foreclosures launched prior to the pandemic will be the first to go ahead, ”said Mike Rawls, CEO of Xome, a subsidiary of Mr. Cooper.
Beginning August 31st, pandemic foreclosures will be limited to abandoned properties and borrowers who have not responded to contact under the rules of Regulation X for servicers for 120 days. This gives states time to provide aid before the risk of foreclosure for people with pandemic hardship begins to become serious in the next year.
"It's an important gating element in the servicer rules," said Matt Douglas, vice president of the Housing Policy Council. "The Housing Assistance Fund dollars are only available to those who have become seriously criminals after the pandemic began, and Reg X's prohibitions are the same."
A test case of how money can be distributed
However, not all HAF funds will go to foreclosure prevention. While this is a legal use, it is also likely to be used for home insurance and utility payments.
For example, the New Mexico Mortgage Finance Authority tested two HAF programs. One provides relief to borrowers who missed mortgage or property tax payments, and another provides funding for emergency roof repairs, said Rebecca Velarde, NMMFA's senior director of policy and planning.
States have been authorized to spend up to 10% of their money on start-up costs and testing to prepare for the creation of official plans, and New Mexico was one of the first to do so.
"We have very old housing stocks in New Mexico and many rural areas," Velarde explained of why the state wanted to adjust its testing program.
In the state's pilot program, mortgage relief went directly to service providers who helped contact homeowners. Like all HAF funds, the funds went to borrowers in greatest need, as defined by low to middle income metrics. "Extremely low" incomes were aimed for in the umbrella subsidy.
While the government pilot has custom criteria, it also uses some proposed standards for records and agreements. This included a proposed shared data file, a template for third-party authorization, and a servicer-state collaboration agreement available from industry groups, Velarde said.
Hardest Hit Fund, Forbearance Outreach are servicer guide for HAF
The National Council of State Housing Agencies, the Housing Policy Council and their members have submitted templates for review to the Treasury Department, which are updated versions of some previously used in connection with the Hardest Hit Fund to create the HAF- Make distribution more efficient. HHF was a homeowner aid program that was distributed across the states after the Great Recession.
Housing assemblies are also implementing networking and contact methods that are used to get the word out about pandemic suspension programs to ensure the money comes in broadly and quickly enough to stave off as many pandemic foreclosures as possible.
"We're redirecting our campaign for hard-to-reach borrowers and letting them know government resources are available," said Schwartz, who also worked with Dillard to launch an indulgence-awareness campaign titled "Not OK? That's OK, ”in conjunction with a public-private housing coalition.
The campaign tested a wide range of reach, from billboards to online advertising, with social media and email attracting the strongest responses, she said. Industry groups confirmed that they hope to help states raise awareness of HAF money with a similar campaign.
"We hope to have [messaging] ready for our members that they can easily download and integrate either through social media or on their websites," said Sara Singhas, director of credit management at the Mortgage Bankers Association.
Ultimately, however, it is up to each state to distribute the funds and carry out the review process for the distribution.
"The best course of action might be to let all defaulting borrowers know that these resources are out there and what the criteria are," he said.