Biden has extended the eviction moratorium - what that means for mortgage
The Biden administration announced yesterday that it will extend the CDC’s federal moratorium on evictions of renters who owe back rent through the end of June. The moratorium had been set to expire on Wednesday, having been put in place under the Trump Administration. It had been criticized by both tenant advocacy groups, who argued it left too many loopholes, and landlord advocates, who argued it restricted the freedom of property owners.
Holden Lewis (pictured), home and mortgage expert at NerdWallet, believes that in our current stage of recovery, an extension of the moratorium was necessary.
“There’s so much back rent owed,” Lewis said. “I’ve read that just in January, there was almost $60 billion in back rent. We have had $52 billion of rent assistance under both administrations, that is due to be handed out. The bottom line is there is still more back rent owed than there is assistance. This problem is going to continue for a few more months until people get back on their feet.”
Lewis explained that the Biden administration was widely expected to make this move, and only left it to the last minute because of the sheer volume of other tasks it is facing at the moment. He also noted that we can expect the moratorium to be lifted when a confluence of factors drive more stability for renters.
While vaccination numbers have exceeded expectations, we’re not out of the pandemic yet. Employment data remains below pre-pandemic levels, despite some improvements, and job losses remain concentrated among lower wage earners and service industry workers, who largely rent.
Even if President Biden hopes for an effective end to the pandemic in America by July 04, it’s somewhat unlikely that we will not still be in some form of economic recovery well past that date. It’s likely, then, that the moratorium isn’t going anywhere anytime soon.
While that news might be a relief for renters, the outlook for landlords is somewhat bleaker. Lewis noted that many landlords across the country are facing a tight squeeze as expenses and carrying costs mount up, while many tenants are still unable to pay their rents. Those struggles are then passed on to the mortgage servicing industry, Lewis noted, which has to bear unpaid mortgage bills because of a dearth in rent payments. It’s an unhappy picture that’s persisted for a long time and while renters have shown they’ll go to extreme lengths to pay their bills, the sheer volume of unpaid rent is a massive hurdle to overcome.
Lewis sees a solution in the form of rental relief programs. While he expects the process will be messy and convoluted, billions of dollars in government spending ought to dislodge some of the stuck bubbles of unpaid rent. If the federal government can shoulder the primary burden as renters get back on their feet, then mortgage professionals can step in and help landlords pay back-bills through balloon payment programs.
If these relief payments don’t come and the countless Americans owing back rent are evicted, they could be swept up in a rapidly accelerating affordability crisis. Lewis believes that this could be “disastrous” for millions of Americans suddenly evicted from their homes and unable to afford rent. Nevertheless, Lewis takes hope in the federal government’s apparent unwillingness to let this happen.
“I have hope because I’m just a classic believer in throwing money at the problem after a disaster,” Lewis said. “I realize a lot of people disagree with that, but when you have a disaster of this magnitude, it’s just fine to throw money at it and worry less about the effect later.”