House Speaker Nancy Pelosi of Calif., speaks about the so-called Heroes Act, Tuesday, May 12, 2020 … [+]
ASSOCIATED PRESS
This Friday, the U.S. House of Representatives is to vote on an omnibus 1,800-page economic aid package that, if passed into law, would pump additional $3 trillion into the country’s faltering economy.
House Speaker Nancy Pelosi (D-Ca) dubbed the so-called Health and Economic Recovery Omnibus Emergency Solutions, HEROES, Act a “bold legislation.” It introduces new individual payments, financial relief to states, an extension of the $600 supplemental federal unemployment insurance, further small business loans and much more.
The HEROES Act also encompasses at least $175 billion for rent and mortgage assistance. Here is what this means for housing.
Emergency rental assistance
The omnibus bill allocates $100 billion, to be distributed through the Department of Housing and Urban Development, for assistance with rent and other housing costs such as utilities, relocations, security deposits and fees. The provision benefits low- and medium-income renters, who earn less than 80% of the median income in their metropolitan area.
Some 40% of the funds that each state receives would have to go to renters whose income does not exceed 30% of the area median income. Those with income no larger than 50% of the median income would be eligible for 70% of the overall assistance, while any remaining amounts could go to families earning no more than 80% of the area median income. Native American renter households would receive 2% of allocated funds.
The maximum amount of homelessness prevention assistance that renters can obtain is 120% of the fair market rent for their metro area.
The rental postulates in the omnibus bill reflect a proposal sponsored in the U.S. House by Representatives Maxine Waters (D-CA) and Denny Heck (D-WA) and introduced in the Senate by Senator Sherrod Brown (D-Ohio).
Homeowner assistance fund
The bill established a homeowner assistance fund at the Department of Treasury, which is to provide U.S. states and territories with funds to prevent mortgage defaults and property foreclosures that would displace families experiencing financial challenges after Jan. 21.
For home loan borrowers, the assistance could reduce the mortgage principle or interest rate, pay property taxes, insurance as well as utility expenses, among other authorized uses. The majority of the aid targets homeowners with incomes less than 80% of the area median income.
Because the funds would reach homeowners through local housing agencies, Americans can utilize the financial aid toward both federally-backed and private home loans.
The Treasury secretary shall allocate dollars to all states based on the number of their unemployment claims relative to the nationwide figure. No state shall receive less than $250 million, while Guam, American Samoa, the Virgin Islands and the Northern Mariana Islands would split a total of $200 million. The bill earmarks a total of $75 billion for the fund.
If the bill becomes law, the Treasury secretary would have two weeks to determine the amounts available to each state. To receive those funds, state housing finance agencies shall submit disbursement proposals for the Treasury’s approval.
Moratorium on evictions
The bill mandates a ban on evictions for rent nonpayment for a year following its enactment. After the moratorium expiration date, non-paying tenants would have 30 days to vacate their units.
Residential mortgage forbearance
The HEROES Act would provide 12-month mortgage forbearance on government-secured as well as private loans for single-family residences as well as buildings of up to 4 units. Currently, the CARES Act covers only government-secured mortgages, which are about 70% of all such financial products.
Furthermore, homeowners who have missed two mortgage payments since March without receiving forbearance would be granted an automatic 60-day suspension of their loan obligations. Upon borrowers’ oral or written affirmation of COVID-19 hardship, lenders shall stretch the automatic forbearance for another 120 days, which could be further extend to a whole year. Borrowers may also elect to curtail their forbearance period – and within a month be presented with repayment options for any skipped payments.
The bill instructs servicers to provide new forbearance seekers with the terms of their plans, including beginning and ending dates, extension possibilities and repayment options upfront.
During forbearance, no fees or charges beyond what would be typical for a monthly mortgage payment should be levied.
Multifamily mortgage forbearance
The bill upholds the CARES Act’s 90-day forbearance rule for multifamily mortgages but extends it to include private loans in addition to federally backed mortgages. While they benefit from forbearance, property owners shall not evict renters. Once forbearance is over, landlords would have a year to catch up on their loan payments.
Liquidity help for servicers, apartment property owners
The bill also dictates that the Department of Treasury shall provide mortgage servicers with access to loans and investments to maintain liquidity during borrowers’ forbearance. Moreover, the proposal would establish a credit facility to offer long-term, low-cost loans to residential rental property owners who have incurred financial losses caused by reduced rent payments. During the course of their loan, landlords shall not evict or charge any rent nonpayment penalties.
The so-called HERO Act would also coordinate rural rental and public housing assistance.