Categories: HousingMortgage

Trump announces moratorium on foreclosures due to coronavirus

U.S. President Donald Trump announced Wednesday a full moratorium on foreclosures for homeowners with mortgages backed by Fannie Mae, Freddie Mac and the Federal Housing Administration.

The Department of Housing and Urban Development has also provided help, saying it will suspend all evictions of public housing residents.

It’s said that FHA loans and public housing residents account for more than 9 million U.S. households, while Fannie and Freddie back the vast majority of single-family mortgages in the country. The moratorium on those mortgages has currently been set at 60 days, but could be extended.

Trump announced the measure as part of the government’s response to the economic turmoil that’s been caused by the spread of the coronavirus, which causes the COVID-19 respiratory disease. U.S. Treasury Secretary Steve Mnuchin recently said it could cause unemployment to rise to 20%.

Fannie Mae and Freddie Mac act as guarantors of around 97% of all U.S. mortgages, which are bought and bundled into bonds called mortgage-backed securities.

As such, it means the moratorium will apply to the vast majority of people with a mortgage. Those whose mortgages aren’t backed by Freddie or Fannie are likely to be condo owners, subprime borrowers or owners of expensive luxury homes.

The moratorium is intended to stave off a glut of foreclosures like we saw in the 2008 housing crisis, which led to millions of homeowners defaulting en masse and caused a massive increase in the availability of homes on the market.

As for the HUD’s moratorium, this applies to over a million households, the majority of which are likely to be elderly and disabled persons. It doesn’t apply to those who hold housing vouchers, however.

Of course, while this action will protect millions of Americans, there are millions more living in private rental homes that remain vulnerable to eviction should they be unable to pay their rent. It’s not clear yet if the government will provide any support to people in this category.

Some cities have however announced private moratoriums on evictions that range from two weeks to indefinitely, including Los Angeles, Miami, New York and San Francisco.

Mike Wheatley

Mike Wheatley is the senior editor at Realty Biz News. Got a real estate related news article you wish to share, contact Mike at mike@realtybiznews.com.

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