CEDAR RAPIDS — As the federal moratorium on housing foreclosures comes to an end, lenders and financial counselors do not foresee a tsunami of foreclosures in Iowa.
In fact, some say their worst fears about impact of the coronavirus pandemic on mortgage delinquencies and potential foreclosures have not been realized.“ We've actually been experiencing a decrease in our mortgage delinquency in the last 12 months in comparison to the previous 12 months,” said Christina Christensen, account resolution manager for Veridian Credit Union, which has 30 offices in Iowa and eastern Nebraska. “That's a bit of a surprise coming off a pandemic.”
Lenders and agencies working to prevent foreclosure attribute that to prompt action by creditors to work with borrowers, including deferring payments and waiving fees, and halting residential foreclosure actions and evictions
The $55 billion in CARES Act and American Rescue Plan funds to help tenants, landlords and lenders have and will help going forward, they said.
The “Iowa ethic” of responsibility also has helped keep Iowa delinquency numbers lower than national averages, “which probably speaks to our part of the country, the demographic of who's living here,” a spokeswoman for the Iowa Bankers Mortgage Corp. said.
Nationwide, there were nearly 11,000 properties with foreclosure filings in May, according to ATTOM, a nationwide real estate data analytics firm. That was down 8% from the previous month, but 23% higher than a year earlier.
In 2019, foreclosure filings fell to a record low of 493,000, which is 0.36% of all housing units in the United States, ATTOM said. That was down 21% from 2018 and a decline of 83% from a peak of nearly 2.9 million in 2010 to the lowest level since tracking began in 2005.
However, for a variety of pandemic-related reasons, there are Iowans facing the possibility of foreclosure when the moratorium expires July 31. Horizons A Family Service Alliance in Cedar Rapids is seeking to hire an additional financial counselor to deal with dozens of new clients, said Kelzye Bedwell, director of financial stability.
The family services agency is a U.S. Housing and Urban Development-certified housing counselor and partners with the Iowa Finance Authority to help homeowners.
“People are feeling that uneasiness about the future of their financial situation with those moratoriums and different protections coming to an end,” Bedwell said.
For some, that includes the end of the grace period for student loan repayment.
For those working on foreclosure prevention, “it's kind of like everyone in the industry has been kind of holding our breath waiting for this influx of applications and it hasn't come so far,” added Ashley Jared of the Iowa Finance Authority that administers as Homeowner Foreclosure Prevention Program.
That could change “as we move forward, and really start to see the impact of the pandemic,” Veridian’s Christensen said. “We definitely could start to see that spike in delinquency and foreclosures increase. We just haven't at this point.”
According to HUD Comprehensive Housing Affordability Strategy data, cited by Jared, before the pandemic 56% of homeowner households with incomes below 50% median family income were paying more than 30% of income on housing and 31% were paying more than half their income on housing.
The Iowa mortgage bankers association, past due loans in Iowa increased from 3.3% in 2018 to 5.3% in 2020, and seriously delinquent past due 90 days or more increased from 1.6% to 3.4%.
Most of those Horizons is working with have lost their jobs or are working fewer hours because of the pandemic, Bedwell said.
In some cases, jobs disappeared. In other instances, people who lost one job started another but have not regained firm financial footing.
“We see people who were unable to return to work for one reason or another,” Bedwell said. It could be long-term COVID-19 effects for them or a family member.
“We've also seen some mothers who, due to a burden of child care and costs and things like that, are unable to return to work.”
While there’s no typical case, most involve middle- to lower-income homeowners, many who have been in their homes five to 10 years, Christensen and Bedwell said.
Iowa has received $50 million in federal coronavirus pandemic relief funds to help tenants, landlords and lenders. So far, the state has provided more than $2 million in assistance to homeowners.
Qualifying applicants could receive four months of mortgage assistance up to $3,600.
That’s less perople seeking help than the Iowa Finance Authority anticipated, most likely due to the mortgage moratorium, and Jared expects the number to rise when it expires.
At Horizons, “for a large majority of the clients, we are able to create or at least suggest a plan that could keep them in the home. That's always the goal,” Bedwell said. If that’s no longer an affordable or available option, Horizons works to “create some sort of an exit plan to avoid foreclosure.”
In addition to deferred payments, some lenders are not reporting suspended payments as past-due to consumer reporting agencies or not charging late fees.
Other options include a continuation of the payment suspension, moving the missed payments to end of the loan or a modification to address longer-term financial changes that may impact their ability to keep up with their monthly payments, spokesman Alfredo Padilla said in a statement from Wells Fargo Home Mortgage.
In other than very specific cases, it has stopped all foreclosure-related activity through the end of the year on occupied properties for mortgage and home equity customer.
Veridian has offered more than 1,000 loan extensions, Christensen said. From early on, she added, Veridian changed how it communicated “to be more proactive, reaching members after a payment is missed so we could really partner with them as soon as possible to find a solution.”
“When we realized that this wasn't going to be so much of a temporary situation, that it could be a more of a long-term situation, that's when we really became more intentional about our communication approach,” Christensen said.
As the moratorium expires, borrowers who anticipate difficulty staying current on their payments should be touch with lenders so they understand their individual circumstances and can identify the best way to help them going forward, lenders said.
“We want to make sure that what we do today is going to set you on the path, the right path moving forward, so you're going to be able to stay in your home and be able to afford it,” Christensen said.
At Horizon, the goal is to help people from going backward financially, Bedwell said. When a person loses their home or faces foreclosure, “you just see this large, widespread domino effect that not only affects the person losing the home, but it affects their children … the community around them and those who know and care about them.”