A program that assists Pennsylvanians facing mortgage foreclosures is bracing for a wave of pandemic-related need, at the same time that it’s worrying about its own finances.
Some foreclosures are still happening now, though many are on hold; a foreclosure moratorium is in place until July 1 for homeowners with federally-backed mortgages.
Advocates say there will likely be an increase in foreclosures due to pandemic-related unemployment, though they don’t know yet how bad it will be.
“We expect that … the numbers are really going to increase once the forbearance programs expire, unless there's some big government infusion of assistance,” said Catherine Martin, an attorney at Neighborhood Legal Services in Pittsburgh, who helps people facing foreclosure.
Pennsylvania’s Homeowners' Emergency Mortgage Assistance Program, also known as HEMAP, is a loan program that aids people in foreclosure and in danger of losing their homes.
The program is widely considered to be successful at helping those who qualify – a 2011 study by the New York Federal Reserve found HEMAP was more successful than Great Recession-era federal programs that aimed to help struggling homeowners. HEMAP dates back to 1983, when southwestern Pennsylvania was dealing with massive levels of unemployment due to the loss of steel and manufacturing jobs, and laid-off workers were faced with losing their homes.
However, Pennsylvania has not given HEMAP state any funds since the 2011-2012 fiscal year.
It has been operating with money from the national mortgage servicer settlement agreement (a 2012 settlement involving the federal government, state attorneys general, and the nation’s five largest mortgage servicers). It gets some funds from loan repayments.
Officials at the Pennsylvania House Finance Agency, which runs HEMAP, say the program normally has budgetary ebbs and flows, as some years see more people needing assistance than others.
HEMAP has more than $10 million in reserves – under normal economic conditions those reserves would last for several years, officials said. But looking ahead to when foreclosure moratoriums end, staff anticipate a jump in requests for assistance.
“There are certain periods of higher volume that eat up repayments faster. And sometimes that means that we need to seek additional resources to help new people coming into the program. And so that's where we are right now,” said Melissa Grover, PHFA’s government affairs director. “We're anticipating that, you know, in the potentially not too distant future, there may be the, you know, a higher volume of application submissions. And therefore, we want to make sure that the program has sufficient funding in order to help as many people as possible.”
PHFA officials last year submitted an appropriation request to Governor Tom Wolf’s budget office but now say they’re waiting to see if federal aid will become available to homeowners in the latest round of COVID-19 relief from Washington, before pushing for any additional state appropriations for the fiscal year that begins July 1.
“Since it is hard to anticipate exactly how and when demand for HEMAP may rise, we don’t have a timeline for how this situation will unfold. But it seems pretty clear the need for foreclosure assistance will spike as foreclosure moratoriums end,” said Scott Elliot, a spokesman for PHFA.
Pre-pandemic, the program averaged about 200 applications per month; it’s now averaging fewer than 20 applicants monthly, likely due to the restrictions on foreclosures still in place.
Dan Sullivan, housing stabilization program administrator at Action Housing, said the program is extremely important.
“There should be concern and there should be a push for a significantly larger appropriation to HEMAP,” he said. “And I think HEMAP can save a lot of homes. HEMAP historically has saved a lot of homes. It's a valuable, valuable tool in the toolbox to keep PA residents in their homes.”
It’s not clear how many people could face foreclosures before or after moratoriums lift.
“The [federal] government plays a really big role here, so it really is dependent on what the government will do,” said Daryl Fairweather, chief economist at real estate brokerage Redfin. “I think the administration has signaled that they aren't willing to let people get foreclosed on if it wasn't really their fault. They really want to work with people who lost their jobs during the pandemic and they want to extend the moratorium for as long as is appropriate.”
Fairweather said she does not anticipate a repeat of the foreclosure wave that was seen in 2008 recession, which started in the housing market.
About 6.7 million Americans have been in COVID-19 related mortgage forbearance at some point since the beginning of the pandemic, though many have since left those plans, according to mortgage data company Black Knight.
About 2.1 million families are behind at least three months on mortgage payments, according to an estimate released Monday from the federal Consumer Financial Protection Bureau.
“There is a backlog of foreclosures building up – loans that were in foreclosure prior to the moratoria; loans that would have defaulted under normal circumstances; and loans whose borrowers are in financial distress due to the pandemic,” Rick Sharga, executive Vice President of RealtyTrac, a foreclosure listings portal, said in a statement in January. “While it’s still highly unlikely that we’ll see another wave of foreclosures like the one we had during the Great Recession, we really won’t know how big that backlog is until after the government programs expire.”
