The government’s mortgage forbearance policies exclude 61% of Americans

by Vanessa Journey

The most overlooked cataclysm from the COVID-19 pandemic is the coming crunch on America’s low-income homeowners and renters. The families most in need may be facing the biggest wave of evictions and foreclosures since the Great Recession.

Reading the headlines, you’d think the U.S. is doing a great job supporting Americans struggling to make their rent and mortgage payments. Indeed, as the pandemic was obliterating 30 million jobs starting in early March, virtually every federal agency that provides housing or backstops home loans unveiled widely lauded forbearance programs that allow tenants and borrowers to forgo payments for extended periods targeted to carry them through to the recovery.

The government’s approach to housing relief, however, suffers from a basic weakness. It helps only the households holding mortgages backed by federal government sponsored enterprises and federal agencies such as Fannie MaeFreddie Mac, and the FHA. Fannie and Freddie impose rigorous income and credit standards, so that, in general, borrowers who obtain government-backed loans are in a stronger financial position than those who get mortgages from private lenders.

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